The American Gaming Association (AGA) is urging the United States government to prohibit prediction market exchanges from offering event contracts involving sports.
AGA’s Stance
The AGA opposes sports contracts on prediction exchange markets like Kalshi, Crypto.com, and Robinhood. These platforms allow users to risk money on various issues, from weather forecasts to bitcoin prices, claiming they offer derivatives or financial instruments traded as investments.
CFTC Review
The Commodity Futures Trading Commission (CFTC), an independent federal agency regulating derivatives markets, is reviewing how to govern prediction markets and the legality of sports-related event contracts. AGA President and CEO Bill Miller hopes the CFTC will prohibit these exchanges from offering sports contracts, arguing that such a decision is pivotal. Miller believes that allowing prediction sports-related contracts would undermine years of state-led progress in regulating sports betting.
Miller’s Argument
Miller advocates for a ban on sports contracts, stating, “The CFTC must reject the classification of sports event contracts as investment products and reinforce the integrity of the existing state-regulated sports betting market. Anything less risks destabilizing a system carefully built to balance economic opportunity with consumer protection and support for states and communities.” He further emphasizes the need to protect states’ rights and prevent an unregulated national betting market from taking root.
Investments or Bets?
The line between gambling and investing has blurred with the rise of electronic trading platforms. Warren Buffett noted that markets now exhibit more casino-like behavior than in the past. Kalshi and similar exchanges argue that their contracts are investment vehicles, not wagers or bets. However, Miller contends that predicting the outcome of a sporting event is rooted in gambling. He asserts that these platforms’ advertising clearly presents their offerings as sports betting, which threatens state authority, consumer protections, and the integrity of the legal sports betting industry.
Upcoming Roundtable
The CFTC is set to hold a “prediction markets roundtable” later this month, with a date yet to be determined. The CFTC has been fielding comments from invested parties since early last month. Entities supporting the CFTC banning sports-related prediction market contracts, along with the AGA, include GeoComply, Major League Baseball, the Indian Gaming Association, and US Rep. Dina Titus (D-Nevada).
Opposition to Sports Contracts
CFTC Acting Chair Caroline Pham has expressed opposition to sports contracts on prediction exchanges. She stated, “Unfortunately, the undue delay and anti-innovation policies of the past several years have severely restricted the CFTC’s ability to pivot to common-sense regulation of prediction markets. Despite my repeated dissents and other objections since 2022, the current commission interpretations regarding event contracts are a sinkhole of legal uncertainty and an inappropriate constraint on the new administration.”
The outcome of the CFTC’s review and the roundtable discussion will be crucial in determining the future of sports contracts on prediction market exchanges.
