Despite legal wrangling involving prediction market firms over the last year, the Commodity Futures Trading Commission (CFTC) remains adamant that sports event contracts are different from traditional sports betting.
CFTC Chairman Michael Selig told Axios this week that prediction markets and sports betting are different and shouldn’t be regulated the same. He views prediction markets as financial products, something the commission has tried to make clear in recent months by suing states seeking to bar the companies from operating.
“They’re different models,” Selig said. “The conventional sportsbooks and casinos are entertainment, and they have a lot of authority to be able to kick people out when they keep winning. When you go to the derivatives markets, that’s not allowed. You keep winning? Great. You take your earnings.”
Market Dynamics Affect Event Contracts
Selig pointed to other differences between prediction markets and sports betting. In prediction markets, real-time customer sentiment impacts positions on certain events, introducing market dynamics.
However, sports betting odds are set by the sportsbook, Selig said. On platforms like Kalshi and Polymarket, traders compete against each other rather than trying to beat the house. The price of a contract directly reflects the market’s perceived probability of that event actually occurring.
“What you’re seeing is markets versus entertainment,” Selig said. “For those that want the discipline and integrity of a market, it’s a better model. For those that want entertainment, the casinos might be the model for them.”
Prediction markets also feature more limited sports betting options, Selig said.
States Take A Different View
State gaming regulators haven’t agreed with the chairman’s assertions and argue that offering sports event contracts essentially puts these firms in the sports betting business. Those in the gaming industry note that the contracts are still based on the result of a game, with users still betting on the outcome.
States have also argued that prediction market platforms lack consumer protections that sports betting operators must adhere to. Earlier this week, American Gaming Association CEO Bill Miller criticized Selig and the prediction market industry.
“The head of the CFTC, quite frankly, is a joke,” Miller said. “He believes somehow that what he’s doing is Uber, and the rest of the country is the taxicab industry. That’s not the case. He’s not facilitating something that’s a public good. A federal regulator charged with regulating derivatives around agricultural contracts should not be engaged in it.”
The results in court have been mixed so far. Some states, including Massachusetts and Nevada, have won preliminary injunctions halting prediction market companies from operating while the cases move forward.
Some federal rulings, however, have gone in favor of prediction markets. Recently, though, an Ohio federal judge ruled against Kalshi.
