- The Commodity Futures Trading Commission released a 267 page proposal on Wednesday to change some rules for prediction markets related to sporting events.
- Markets related to injuries, children’s sports, officiating, and fighting will no longer be available.
- Legislators continue to fight against prediction markets, arguing that they should follow the same laws as traditional sports betting.
WASHINGTON – Prediction markets have grown tremendously in popularity over the past few years, but not without plenty of controversy on the legal side of things.
The Commodity Futures Trading Commission (CFTC) is the federal agency responsible for regulating such prediction markets and has come under fire on numerous occasions, specifically in regards to sports betting “contracts,” which players can buy and sell, similar to the stock market.
On Wednesday, the CFTC released a 267-page proposal in an attempt to create some clarity and lay down ground rules for prediction markets, such as Kalshi and Polymarket, going forward.
A key section of the proposal went over what constitutes trading markets that legislators argue could be harmful to “public interest,” as well as markets that do not provide any inherent economic value. Unsurprisingly, the agency found that sporting event contracts qualified as gaming and are not against public interest.
They said that markets for scores of sporting events, spreads, game outcomes, and tournament results “may serve price discovery functions and provide meaningful information,” while markets centered around officiating, injuries, and fights were not in the public interest.
The main gripe that lawmakers and Native American tribes have against prediction markets is their ability to operate outside of the confines of traditional legal sports betting sites, which allows them to bypass age and tax laws.
The divide on what constitutes sports betting is what keeps the two sides against each other. The CFTC has maintained that its contracts for sporting events are more akin to buying and trading stocks than wagering on sports in a traditional sense, while legislators argue that there is virtually no difference, only in how the action is carried out.
The proposal using verbiage like “gaming” when referring to their sporting event contracts further adds to the confusion, achieving the opposite of what the CFTC seems to have initially set out for.
They continue to fight for such prediction market apps to be fully under the jurisdiction of the federal government, while legislators in other branches of government push for laws at the state level.
