The commission Wednesday (26 February) released the list of comments it received in relation to the upcoming roundtable. First announced 5 February, the deadline for submissions was 21 February.
In the announcement, the commission said the meeting would take place “approximately 45 days at the conclusion of its requests for information”. April 30 has been circled as the prospective date.
The roundtable is set to discuss prediction markets and their foray into sports contracts. Prediction markets are similar to any futures exchanges in that they allow traders to purchase contracts based on the outcome of events. Exchanges such as Kalshi, Polymarket and Crypto.com match opposite contracts to each other and make money on trading commissions. They operated for years in a grey area, but Kalshi opened the floodgates last fall after surviving legal challenges from the CFTC in federal court.
Prior to the November US elections, the platforms took in billions in election contracts. At that time, the gaming industry paid little attention to the markets. But in late January, the platforms moved into sports contracts, offering markets on the Super Bowl and other championship winners.
That development has significantly shifted the conversation and caused much more alarm for the regulated industry. The platforms are federally legal as of now, available in all 50 states, and aren’t subject to gaming taxes or responsible gaming obligations. Thus, they represent the latest threat to both tribal and commercial operators.
Tribal consensus clear: No sports contracts
In all, there were 19 submissions to the commission. Eleven of those came from tribes or tribal groups. The rest were split among various interests, ranging from the American Gaming Association (AGA) to financial policy groups and even individuals. Aside from the AGA, there were no submissions from legal operators or other industry groups.
The 11 tribal submissions included individual tribes and groups from across the US. Typically, it is very difficult to find consensus within Indian Country given disparities of size, resources and location among tribes. But in this case, every submission was virtually identical in its rejection of sports event contracts.
Every tribal body noted similar arguments, including infringements on sovereignty, violations of exclusivity under the Indian Gaming Regulatory Act (IGRA) and the potential harmful impacts on tribal gaming revenue and the services supported by it.
The following section was featured in several of the submissions, including one from the Indian Gaming Association (IGA):
“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.”
Prediction markets are ‘different kind of threat’
To tribes, sports event contracts represent the latest in what has become a growing list of concerns. In recent months the IGA has crusaded against the rise of sweepstakes sites. California tribes in January filed a suit against card rooms that could massively impact the state’s gaming industry. And in other states such as New York and Oklahoma, compact negotiations have become increasingly strained.
But prediction markets, particularly with sports contracts, could become the biggest threat of all. Their nationwide reach gives them access to hard-fought tribal markets like California, Minnesota, Oklahoma and Florida.
“What is happening at the CFTC is a different kind of threat,” tribal gaming attorney Scott Crowell said on a panel at the Western Indian Gaming Conference 27 February. “It is a green light at the federal level. … It makes all of these discussions about [sweepstakes, illegal platforms] moot, if you can’t turn it red.”
Lack of industry voices noticeable
If the tribal majority was noteworthy, so too was the lack of industry response. This could be interpreted a couple different ways: For one, the AGA is the premier lobbying voice of the industry, and members could just be rallying behind the association’s lead.
In its submission, the AGA requested to take part in the upcoming discussion. It said sports event contracts “are problematic for a variety of public policy reasons” and also cautioned against their federal reach.
“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,” the association wrote. “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.”
There is also the possibility that the industry is evaluating potential business opportunities. If the markets are allowed to continue, existing operators could pursue launching similar products. Even now, operators such as DraftKings have been exploring new possibilities. Last summer the company proposed and then quickly nixed a surcharge on winning bets in Illinois to combat tax increases. Then in late December it launched Sportsbook +, a subscription service for New York bettors that boosts parlay odds.
On its fourth-quarter earnings call 14 February, DraftKings CEO Jason Robins took a neutral stance on the markets.
“I don’t view [prediction markets] as a threat,” he said, per Sportico. “It increases the total addressable market for people who like those types of products, which is a good thing.”
CFG submission stands out among crowd
Of all the submissions to the CFTC, the Campaign for Fairer Gambling (CFG) was among the most notable. The controversial policy group was founded in 2012 by industry veteran Derek Webb. Webb, a former poker player and table game inventor, has since turned his attention to responsible gaming and harm minimisation.
The group was a leading voice behind reducing the stake limit on fixed-odds betting terminals in the UK from £100 to £2. In May 2023, the CFG relaunched after a four-year hiatus to turn its attention to the US market. It has had a heavy presence in legislative happenings across the country so far this year. In its submission, the group seemed to advocate for the markets and juxtaposed them with the harms of the regulated industry.
“Logically speaking, if politics and cultural events markets are acceptable markets, then there is no inherent rationale to indicate that sports events are not acceptable markets,” it wrote.
Legal sportsbooks have come under fire recently for the practice of limiting bettors. Prediction markets, the CFG said, “should welcome all participants” with prices that “should be more accurate than those of state operators.” The group also mentioned prop bets and in-play wagers, which have been at the center of multiple integrity scandals. Prediction markets are “unlikely to offer those types of wagers,” the group said, so there is “no evidence” that they will impact integrity.
“CFG general view is that gambling should be permitted but not promoted,” it wrote. “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.”
The group declined to comment beyond what was included in the submission.
Original article: https://igamingbusiness.com/legal-compliance/prediction-markets-cftc-comments/
