Growing Resistance to CFTC’s Oversight of Sports Prediction Markets

Opposition against the United States Commodity Futures Trading Commission (CFTC) regarding its control over sports prediction markets is intensifying. Nearly all, except for six state attorneys general, along with all nine casinos in Atlantic City, have united in a coalition to contest the agency’s asserted regulatory authority.

The CFTC’s proposed rule modification concerning event contract derivatives faced closure for public comments on July 27. Prior to this deadline, 44 state attorneys general, alongside the Casino Association of New Jersey (CANJ)—which represents the nine Atlantic City casinos—submitted statements rebuking the independent federal agency’s attempt to cement its authority over sports prediction markets.

Since late 2024, federally regulated prediction markets with Designated Contract Market (DCM) licenses from the CFTC have begun facilitating trading on sports events. Participants can buy and sell shares based on sports outcomes, such as predicting whether the Los Angeles Dodgers will clinch a victory tonight.

CFTC’s Challenge to Sports Trading

Advocates for prediction markets and the CFTC argue that sports trading empowers fans to leverage their insights for financial benefits, akin to shrewd investment tactics employed on Wall Street.

“Although some may question the viability of novel financial products, we maintain confidence in our jurisdiction and are committed to its protection,” stated CFTC Chair Michael Selig in May.

Supporters, including the 44 state attorneys general and Atlantic City casinos, concur with the American Gaming Association that the Commodity Exchange Act (CEA) does not grant the CFTC the power to govern gaming, which traditionally encompasses sports betting.

“The CFTC, in the Proposed Rule, exceeds its statutory authority. This regulation would significantly broaden federal oversight in an area of substantial economic and political importance that has been historically managed by states. There is no clear legislative text within the CEA that bestows such authority upon the CFTC,” contended the attorneys general.

“States have long held jurisdiction over gambling—including sports betting. The federal government has not intruded in this domain,” they argued further. “The Proposed Rule oversteps the CFTC’s statutory limitations, conflicts with the Constitution, and could be deemed arbitrary and capricious in its current format.”

The Atlantic City casinos echoed these concerns. The CANJ letter pointed out that the CFTC has not adequately addressed a crucial issue: the CEA forbids trading related to gaming.

“Federal judges and Congressional representatives nationwide have sought explanations for this oversight. The CFTC has merely responded that contracts contingent on sports results do not qualify as ‘gaming’ contracts and are thus not restricted under prevailing regulations. The proposed rule, however, takes an opposing stance,” states the CANJ submission.

What Does the Proposal Entail?

The public comments arise in response to the CFTC’s proposal for a rule that would bolster its claims of regulatory authority over sports trading.

Notably, the proposed rule redefines gaming to encompass games of chance and activities detrimental to the public interest.

“The existence of a contract based on the outcome of a sporting event would counter indications that the contract goes against public interest. In the CFTC’s perspective, such contracts may fulfill essential price discovery roles and provide valuable information,” summarized the Congressional Research Service.

As of now, there is no established timeline for when this proposed rule might be enforced, although it would require at least 60 days after publication in the Federal Register.

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