- The CFTC is backing regulated prediction markets and plans to introduce new rules while keeping sports event contracts permitted on federally supervised exchanges.
- Sports prediction platforms like Kalshi allow trading on game and season outcomes through market priced contracts instead of traditional sportsbook odds.
- Federal and state regulators are disputing who controls sports event contracts, with the CFTC asserting national authority over these markets.
WASHINGTON - The Commodity Futures Trading Commission (CFTC) is moving to actively support regulated prediction markets, including platforms that let users trade contracts based on sports outcomes.
Under Chairman Michael Selig, the agency plans to develop new rules for event-based contracts and to rescind a previous proposal that would have banned markets connected to political and sporting events.
In federally regulated prediction markets, traders purchase and sell contracts depending on the likelihood that a particular event will occur. In sports, this can contain results like season outcomes, championship winners, or significant accomplishments.
These sites, in contrast to conventional sportsbooks, list contracts that, like futures markets, fluctuate in price as expectations do. Exchanges like Kalshi, which are governed by the CFTC, report an increase in trading volume tied to sports.
CFTC Reverses Course on Sports Event Contracts
A key development is the CFTC’s decision to pull back a previous rule proposal that would have banned sports related event contracts. The question of whether federally regulated exchanges may continue to list sports markets was highlighted by that proposal, which was put forth under previous leadership. The commission affirmed by withdrawing it that contracts for sporting events will continue to be allowed until revised rules are ready.
CFTC leadership has stated that prediction markets must follow core derivatives principles, including anti fraud enforcement, anti manipulation controls, trade surveillance, and reporting requirements. Additionally, officials have stated that the goal of new rulemaking is to make clear how exchanges should keep an eye out for odd trading patterns that would indicate misuse of confidential information.
Sports prediction contracts can appear similar to markets offered by the best legal casinos, but they are structured differently. These contracts trade between market participants on authorized exchanges, with pricing that fluctuates over the course of the trading session, as opposed to fixed odds bets put against a house.
There are currently ongoing legal conflicts between state and federal officials. Sports event contracts, according to a number of states with legal casinos, should be governed by state gaming legislation since they are similar to gambling products available in places with licensed casinos. Event contracts are under federal commodities authority, according to the CFTC, which also states that it is prepared to defend that jurisdiction in court.
It is anticipated that new government guidance will influence the future growth and functioning of sports-related prediction markets, particularly as trade activity keeps rising.