NBA: 'Integrity Risks Posed By Sports Prediction Markets Are More Significant' Than Legal Sports Betting
Pro basketball league sends a letter to the Commodity Futures Trading Commission on sports event trading at Kalshi, Crypto.com.
The NBA became the second major professional sports league to weigh in on sports event contracts via prediction markets like Kalshi.
The main takeaways from the professional basketball league’s new letter to the Commodity Futures Trading Commission:
The league does not believe there are adequate protections in place to protect game integrity via prediction markets as things stand.
The NBA is not opposed to sports event contracts via prediction markets with the right protocols in place.
The NBA calls what Kalshi is offering “betting markets”: “In contrast to the many states that have dedicated sports betting regulatory personnel, there is no CFTC division dedicated to overarching, sports-specific oversight of these new betting markets.”
“Without oversight and regulation tailored to the specific circumstances of sports wagering, the integrity risks posed by sports prediction markets are more significant and more difficult to manage than those presented by legal, regulated sports gambling,” reads the letter, signed by Alexandra Roth, the NBA’s vice president and assistant general counsel for league governance & policy.
The letter continues:
“The NBA's support for legalized sports betting has long been underwritten by our view that sports betting is made safer — both for our fans and for our league — it is legal and subject to robust, sports-specific regulation. … While exchanges and brokers operate under the general auspices of the CFTC, that broad-based financial oversight does not include the kind of sports-specific controls and protections that are the hallmark of state sports gambling regulations.”
You can read the whole thing here:
More from the NBA on sports betting via prediction markets
Other highlights from the letter (emphasis added):
“While the longest running NBA prediction markets have covered full-season events (e.g., a market that permits users to wager on who will win this season's NBA championship), the number and type of available markets are expanding at a rapid pace, with offerings now including single-game markets that allow users to wager on which NBA team will win a particular game. This expansion, which has proceeded entirely via the self certification process, suggests to us that player proposition markets (i.e., markets focused on a player's single-game performance) or other potential markets (e.g., markets focused on officiating decisions, league rules, or player injuries) are not far behind.”
“The way new contracts come to market offers a stark contrast: exchanges can launch new, more exotic sports prediction markets via self-certification, which puts the burden of initiating any post-launch review on the CFTC and allows most contract markets to simply proceed unchecked. But for legal sports betting operators, affirmative regulatory approval from the applicable state gaming regulator is required before a new betting market can be launch (sic) in the first place.”
“Likewise, as sports betting prediction markets exist today, we are not aware of any requirement that either exchanges or brokers report potentially suspicious trades or trading patterns to an affected league or cooperate with any league-run investigations into such suspicious activity; nor are we aware of any mechanism that would require ongoing information sharing between exchanges and affected leagues. … In the absence of these and other, related controls, leagues have little ability to monitor and understand integrity risks and issues if and when they arise.”
“If the CFTC does ultimately decide to permit the continued offering of sports event contracts, we encourage it to close this gap and to adopt a comprehensive regulatory and oversight framework analogous to those governing state sports betting markets, and to impose meaningful limitations on the continued expansion, via self-certification, of these markets into ever more exotic and narrow event propositions.”
NBA joins MLB on prediction markets
The letter from the NBA strikes similar notes as a letter from Major League Baseball sent to the CFTC in March. The general tone is “you aren’t doing nearly enough now, but if you do enough, then we could be on board with sports event trading.”
And therein lies the rub:
Will all prediction markets be willing to do what the leagues ask? Right now that’s just Kalshi (plus Robinhood) and Crypto.com, but the number of operators will surely grow if sports event contracts continue to expand. While Kalshi has signed a deal on integrity monitoring, it seems clear that’s not nearly enough for the NBA. The league doesn’t even note that deal in its letter.
Kalshi and Crypto.com so far have not shown any deference to the leagues at all, presumably launching markets on pro or college sports with no contact with leagues. (If there has been contact, it’s not been publicized, nor did it appear in the letters of either MLB or the NBA.)
Will the CFTC be able or willing to step in as an effective regulator of sports betting in the short or long term? That’s not clear as we sit here.
We’re still waiting to hear what the NFL, the NCAA and other major professional leagues think about the rise of prediction markets. The NCAA’s silence is particularly stark, given we saw more than half a billion dollars in trading volume on the men’s and women’s college basketball tournaments via Kalshi and Robinhood earlier this year.