Sports prediction markets on Robinhood, Kalshi and Crypto.com are a direct threat to the integrity of the NBA, the league says.
In a Thursday letter to the Commodity Futures Trading Commission, which oversees those markets, the NBA warned that allowing wagers on the outcome of games without the robust safeguards required of licensed sportsbooks could jeopardize the integrity of the sport. The league called leaving the exploding market unchecked a slippery slope, noting that contracts on player injuries or officiating decisions may be imminent.
“The integrity risks posed by sports prediction markets are more significant and more difficult to manage than those presented by legal, regulated sports gambling,” wrote Alex Roth, the NBA’s vice president and assistant general counsel of league governance and policy. “While exchanges and brokers operate under the general auspices of the CFTC, that broad-based financial oversight does not include the kind of sports-specific controls and protections that are the hallmark of state sports gambling regulations.”
CFTC silent as sports markets boom
The letter comes two weeks after Robinhood and its prediction market partner Kalshi began offering sports contracts on NBA games.
Robinhood launched its first sports prediction market earlier this year for the Super Bowl, prompting the CFTC to temporarily step in. Since then, Robinhood has expanded into 11 sports. Kalshi recently handled over $500 million on March Madness; sports now account for 78% of its trading on an average weekend, compared to other markets like politics and the economy.
In February, Kalshi filed a self-certifying notice to offer player-focused contracts, akin to the player proposition bets on sportsbooks, such as LeBron James over or under X points.
“This expansion, which has proceeded entirely via the self-certification process, suggests to us that player proposition markets or other potential markets — officiating decisions, league rules, or player injuries — are not far behind,” the NBA wrote. “This rapid expansion … has occurred in the absence of the kind of robust, sports-specific regulatory framework that would aim to protect the integrity of the games being played.”
A CFTC roundtable intended to act as the “first major step in establishing a holistic regulatory framework” for sports prediction markets was canceled suddenly last week, just days before it was set to occur. Industry sources confirm the agency provided invitees no reason for the cancellation or a rescheduled timeline. Several state gaming regulators, leagues and gaming groups were set to attend.
Safeguards for sports prediction markets?
The NBA is not opposed to sports prediction markets, only to them operating outside the bounds of existing regulatory safeguards. The league asked the CFTC for a role in helping shape those standards, should the agency permit the contracts to continue.
The league outlined key measures for regulated sports betting operators that do not exist for prediction markets:
- Required approval from state regulators before launching any new betting market
- Mandatory monitoring and reporting of unusual line movement and cooperation with league-led investigations
- Age verification and geo-blocking technology
- Ongoing communication, sharing data with leagues to identify integrity risks
- Licensing protocols for sportsbooks
- Tools to exclude problem gamblers
Some of those protections helped uncover scandals, like the Jontay Porter incident, in which the league determined a player was allegedly manipulating his performance to cash bets.
Leagues, states weigh in
MLB also weighed in on the topic with its letter to the CFTC in March, echoing many of the same concerns.
Additionally, the American Gaming Association has called for prediction markets to be subject to the same high barriers of entry costs and compliance burdens as its members, pointing out that they are operating in 50 states while sports betting is only legal in 37.
Gaming regulators from five states have asked the CFTC to halt sports prediction markets altogether.
Courts decide in favor of prediction markets
Both Nevada and New Jersey have sued to immediately block Robinhood and Crypto.com from offering “unlicensed sports betting.”
However, judges have so far sided with prediction markets, ruling they have a “reasonable chance” of proving the CFTC has jurisdiction under the Commodity Exchange Act. A similar legal challenge is unfolding in Maryland, with a hearing set for later this month.
The NBA has been one of the most outspoken supporters of legalized sports betting among the major leagues for years. Commissioner Adam Silver famously called for legalization in a 2014 New York Times op-ed, arguing that pulling the multibillion-dollar industry out of the shadows would allow for crucial regulations and protections.
