Eighteen entities sent letters to the Commodity Futures Trading Commission as the agency seeks feedback on prediction markets, in documents released by the CFTC this morning.
Most of that feedback was negative and came from Native American tribes that see prediction markets — particularly sports event trading — as an affront to tribal sovereignty on gaming. The American Gaming Association and Rep. Dina Titus (D-Nevada) also offered previously reported feedback against sports prediction markets.
"The breadth of comments submitted to the CFTC shows how many complex issues there are," said Ryan Rodenberg, a Florida State University professor who has followed the ongoing CFTC litigation closely and also filed a comment on his own behalf before last week's CFTC deadline. "For example, there were several detailed comments that delved into how sports betting interacts with the Indian Gaming Regulatory Act."
Notably absent from the comments were any interests representing pro sports leagues (like the NFL), or amateur athletics (aka the NCAA).
Tribes on sports prediction markets
Ten of the 18 comments came from tribal groups or individual tribes. Here is the stance of the Indian Gaming Association:
The IGA strongly urges the CFTC to make it clear that Sports Contracts are prohibited from being listed or made available for clearing or trading. Trading of Sports Contracts is gaming, violates state and federal law and is contrary to public policy for various reasons. Importantly, allowing Sports Contracts to be listed and traded will interfere with the sovereign right of tribes and states to exercise their police power to regulate gaming within their respective territories—a right long recognized by courts throughout the United States.
Additionally, listing and trading Sports Contracts would decimate the value of the bargained-for-exchange made between tribes and states in their gaming compacts when tribes agree to share their gaming revenues – contributing billions to state governments -- in exchange for substantial exclusivity over sports betting in their state.
Lastly, listing and trading Sports Contracts will siphon critically needed revenue that supports tribal and state governments and their citizens by providing an end-run around tribal and state regulation of sports betting. Moreover, they directly violate the Commodity Exchange Act (“CEA”), and the plain language of the CFTC’s implementing regulations because they involve gaming and violate state and federal laws. Any determination that Sports Contracts comply with the CEA would therefore run afoul of the plain text of the CEA and its implementing regulations.
The comments from other tribal interests mirror that sentiment.
You can see all the comments offered to the CFTC on prediction markets here.
AGA + Titus on prediction markets
Here is the core of the AGA’s stance:
The AGA has not taken a position on election contracts or others unrelated to sports and have previously filed comments expressing openness to CFTC-regulated contracts that could provide bona fide risk management tools to regulated sportsbooks. However, the AGA and our members have very strong concerns about the recent self-certification of what are essentially sports betting futures, which are currently available to retail customers in all 50 states. We believe these sports events contracts are problematic for a variety of public policy reasons, which we highlight briefly below and would welcome the opportunity to discuss in more detail during the roundtable.
And here is some of what Titus wrote:
Permitting prediction contracts on sporting events has several troubling effects that the Commission should address before issuing any rulemaking. Prediction contacts on sports create a backdoor way to legalize sports betting in states that have not authorized it. The regulation and legalization of sports betting have traditionally been dealt with at the state level in the United States. As the Commission noted in its previous proposed rulemaking, “In the United States, gambling is overseen by state regulators with particular expertise and governed by state gaming laws aimed at addressing particular risks and concerns associated with gambling. The Commission is not a gaming regulator.” Importantly, each state has their own rules. Some, like Nevada, require those who want to gamble on sports via an app to register in-person. Eight states, like Mississippi, only permit sports betting in-person at a casino. In Florida, a tribal government has the exclusive right to operate mobile sports betting. Importantly, in 11 states (including Texas and California), sports betting has not yet been legalized.
The rest of the comments on prediction markets
Here are the other entities submitting comments, along with a bit of what they wrote:
Geocomply, a geolocation and fraud prevention services provider that is heavily involved in the gaming industry: “We are optimistic that a sensible path forward can be found that allows these innovative areas – sports betting and prediction markets – to coexist and operate in a complementary way. This can be achieved by ensuring that federal regulation of sports event contracts works in harmony with existing state regulatory structures, respecting state choices and addressing key compliance issues like age verification and taxation. We are eager to collaborate with the CFTC and state regulators to find solutions that promote innovation while safeguarding consumer protection and respecting state prerogatives. We would welcome the opportunity to discuss these issues further with the CFTC.”
Vetnos, a sports gaming solutions provider: “Vetnos is concerned that listing Sporting Event Contracts5 on Designated Contract Markets (“DCMs”) or swap execution facilities (“SEFs”) would raise a number of regulatory issues, making certain such contracts unfit for trading on such platforms and the listing of such contracts contrary to the public interest. Accordingly, the CFTC should exercise the statutory authority provided under the Commodity Exchange Act (“CEA”) to prohibit Sporting Event Contracts from being listed on DCMs and SEFs, because (A) Sporting Event Contracts involve gaming, or at least “other similar activity” to gaming that creates a fundamentally different risk profile from other instruments used in capital formation; and (B) permitting DCMs to list Sporting Event Contracts would frustrate and undermine other Federal and State statutory constructs that comprehensively regulate the financial speculation on sporting events.”
Better Markets, a non-profit focusing on global capital and commodity markets: “If the CFTC fails to take decisive actions, it risks opening the floodgates to speculation untethered from any legitimate economic purpose, effectively turning financial markets into federally regulated sportsbooks. This dangerous precedent could reshape financial regulation for years to come, paving the way for trading on everything from sports to entertainment awards without the consumer protections or oversight that apply to traditional gambling.”
StoneX Group, a financial services company: “StoneX applauds Acting Chairman Pham and Commission leadership for their recognition that the CFTC must take a forward-looking approach to event contracts and prediction markets. The time has come for the Commission to deliver the holistic regulatory framework for event contracts that many have sought for decades. We agree with the Commission’s decision to shift course to the ‘common sense regulation of prediction markets.’”
The Campaign for Fairer Gambling: “CFG general view is that gambling should be permitted but not promoted. CFG opposes expanding state online gambling as currently operated as this results in increased detriments of personal, social and economic harms. However, CFG recognizes the differences that will apply to a prediction market and does not have the same concerns.”
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