NEW YORK – Prediction markets and the challenges surrounding their oversight took center stage Thursday at the NEXTPredict conference, where federal regulators and industry executives discussed enforcement, surging sports parlay activity and integrity concerns.
The discussions came as prediction markets expand their offerings amid mounting state and federal lawsuits over their legality, increased scrutiny from professional sports leagues and investigations into suspected insider trading and market manipulation.
CFTC on policing prediction markets
CFTC Director of Enforcement David Miller said the agency wants large offshore prediction market platforms operating in the U.S. to register with the commission so it can monitor their activity.
Asked about a controversial market concerning an alleged rape at Cornell University that Polymarket removed from its international platform this week, Miller declined to discuss internal agency conversations. He said instead that the CFTC has issued advisories warning that certain event contracts may violate federal rules or be susceptible to manipulation, citing injury-related sports contracts as an example.
“We want to make sure that the FTXs don’t happen again,” Miller said, referring to the collapsed cryptocurrency exchange.
Miller also addressed how insider trading laws apply to prediction markets. Asked whether Venezuelan President Nicolás Maduro could trade on his own ouster after seeing helicopters approaching his compound, Miller suggested it might not necessarily violate federal insider trading law, though it would likely violate an exchange’s own rules.
The hypothetical came amid a federal insider trading case against a U.S. Special Forces soldier accused of using classified information about the operation to capture Maduro to make more than $400,000 on Polymarket.
Sports prediction market parlays surge
Parlay-style combination contracts on prediction markets carried approximately $18 billion in industrywide risk exposure over the seven days ending Tuesday, according to White Swan Predicts CEO Bernard Marantelli, whose company quotes roughly 120 million parlays daily.
Marantelli said that figure grew about 20% weekly through the first five weeks of the NFL season and could reach $30 billion by Christmas or early January.
“The growth rate is out of control, really,” he said.
Unlike traditional sportsbooks, these systems allow multiple market makers to compete to price the same parlay, potentially offering customers better odds while creating a new revenue opportunity for firms like White Swan and established sportsbooks like DraftKings and FanDuel.
Polymarket RFQ technical lead Jacob Meleka said its platform processes thousands of requests for quotes and tens of thousands of quotes per second.
Sports leagues raise integrity concerns
Robinhood Vice President JB Mackenzie said his company has spoken with professional sports leagues and avoided offering certain player-related contracts over integrity concerns. Mackenzie said Robinhood has not offered markets the NFL and NBA specifically asked operators to avoid, arguing the potential revenue was not worth the reputational risk.
The comments came two weeks after the NFL told the Supreme Court that the CFTC and prediction market operators, including Kalshi, had resisted its requests to remove contracts vulnerable to manipulation.
DraftKings CEO Jason Robins emphasized his company’s relationship with the NFL, suggesting the league was more comfortable with its safeguards than those of some competitors.
“I do think that we built the collaborative relationship where they feel more comfortable that we’re taking the safeguard measures that are necessary and maybe don’t feel as much that way of some of the other participants in the market,” Robins said.
Meanwhile, International Tennis Integrity Agency senior director of investigations Jenni Kennedy reported an anecdotal increase in courtsiders using prediction markets, where instant settlement can create integrity risks that sportsbooks address with betting delays.
“More worryingly for us is we’re also seeing an increase in those courtsiders trying to engage with players,” Kennedy said.
