Federal lawmakers, professional sports leagues, tribes and many more industry stakeholders have weighed in on sports-related event contracts ahead of an upcoming Commodity Futures Trading Commission roundtable.
The roundtable, slated for March 22, is described by Acting Commissioner Caroline Pham as the “first major step in establishing a holistic regulatory framework” for prediction markets. It comes as the swift expansion of such markets into sports has ignited a contentious debate that could reshape the entire gaming industry and redefine state and tribal authority. The CFTC has received more than 25 comments so far.
The debate centers on whether sports prediction markets — contracts allowing consumers to buy into the outcome of a sporting event — are a financial product or, as critics argue, an attempt to circumvent existing sports betting regulations.
The rise of these markets, pushed by platforms like Kalshi and Crypto.com, has drawn opposition from state regulators, tribal gaming interests, and major sports stakeholders who contend they undermine state and federal laws governing sports betting.
Industry, legislative pushback
The American Gaming Association argues that sports prediction markets are a form of unregulated sports betting, bypassing state and tribal laws while failing to meet the consumer protection standards of licensed sportsbooks.
“Legal gaming operators are subject to stringent regulations, consumer protections, and responsible gaming mandates that prediction markets currently do not adhere to,” the AGA wrote in its submitted comments.
Major League Baseball also expressed concerns, citing the potential for integrity risks in its games. “Any expansion of betting markets, particularly those outside of the established regulatory framework, raises serious questions about game integrity and oversight,” MLB said.
Congresswoman Dina Titus (D-NV), co-chair of the Congressional Gaming Caucus, similarly emphasized the role of state regulators and licensed operators. In her letter to the CFTC, she noted that prediction markets could “create a backdoor way to legalize sports betting in states that have not authorized it,” conflicting with the CFTC’s own stance that it is “not a gaming regulator.”
Tribal stake in prediction markets debate
Multiple tribal gaming organizations, including the Oklahoma Indian Gaming Association, the Santa Ynez Band of Chumash Indians, and the Tribal Alliance of Sovereign Indian Nations, jointly pushed back against prediction markets, arguing that they infringe on the sovereign rights of tribes to regulate gaming within their jurisdictions.
The tribal groups argue that sports prediction markets undercut the exclusivity provisions in their gaming agreements, which have generated billions of dollars in revenue for tribal and state governments. They contend that allowing such markets to operate nationwide would create an “unregulated parallel betting market” without the responsible gaming safeguards required under existing compacts.
Acting commissioner, firms in favor
Others argue they offer a distinct financial instrument separate from traditional sports betting. Proponents contend that these markets allow traders to express views on sports outcomes much like they do with political or economic event contracts, which have long operated under CFTC oversight.
“Prediction markets are an important new frontier in harnessing the power of markets to assess sentiment to determine probabilities that can bring truth to the Information Age,” Acting Commissioner Pham said in a press release. “The CFTC must break with its past hostility to innovation and take a forward-looking approach to the possibilities of the future.”
StoneX Group Inc., a financial services firm, wants clear regulatory framework to legitimize prediction markets, arguing that well-regulated event contracts could provide consumers with an innovative trading tool. “A properly structured regulatory framework can allow these markets to function responsibly while providing new opportunities for traders,” StoneX wrote in its submission.
Yield Sec, a market intelligence firm focused on tracking illicit gambling, suggested that regulated prediction markets could help bring transparency to an industry already rife with illegal activity. The firm warned that failing to regulate these markets could push them onto unlicensed, offshore platforms where oversight is nonexistent.
State enforcement challenged
In Nevada, state regulators have taken a firm stance against these markets, declaring them unlicensed sports betting.
Meanwhile, technology firms like GeoComply, which provides geolocation services for licensed sportsbooks, have highlighted potential compliance risks with prediction markets.
“State laws have clear prohibitions on unlicensed betting, and the ability to enforce restrictions on these markets will be a critical component of any future regulatory framework,” the company noted in its filing.
DraftKings prepares for prediction markets
DraftKings has a pending application with the National Futures Association, the self-regulatory organization for the CFTC. The application, filed in July 2024, suggests DraftKings has been exploring this space well before competitors like Robinhood and Crypto.com made recent moves.
While details on DraftKings Predict remain unclear, CEO Jason Robins has been vocal about his optimism for prediction markets: “It’s certainly something that we have keen interest in seeing how it plays out,” Robins said on DraftKings’ year-end earnings call. At a Morgan Stanley conference, he emphasized that prediction markets are “definitely more on the opportunity side” rather than a competitive threat.
Flutter CEO Peter Jackson, whose company owns FanDuel, recently suggested that while the company is monitoring the space, the products offered by prediction market platforms lack the depth of a full sportsbook.
Investment firms have also flagged the rise of these markets as a potential competitive threat to traditional sports betting. Deutsche Bank recently noted that competition from event-based betting platforms could disrupt the industry, especially as figures tied to prediction markets gain regulatory influence, referencing the appointment of a Kalshi board member to the CFTC by President Trump.
