Digital Wager Wire highlights the most significant events affecting the domestic and international sports betting and gaming industries each week throughout the year.
CFTC Chair Nominee Neutral on Prediction Markets
Prediction trading platforms like Kalshi and Polymarket have muscled their way into the sports betting business by offering trading contracts, much like those that can be purchased on gold and silver; only now, customers can purchase them on sporting events.
They operate much like a regular sports bet, but instead of the ticket holding its value until the outcome of the game is known, contract traders can sell them at a premium or a discount depending on the current score of the game.
The Push for Federal Oversight
Kalshi and other platforms like it began selling Super Bowl contracts with impunity, arguing they are governed by the Commodity Futures Trading Commission, a federal agency whose authority supersedes that of any state governmental body, like gaming commissions.
Naturally, there has been severe pushback from gaming agencies that have sent cease-and-desist letters to the trading platforms and have battled it out in court. The trading platforms have notched early legal victories and continue to operate unfettered in all 50 states without a peep from the CFTC.
But now, Michael Selig is the newest CFTC Chairperson nominee, and when asked about his stance on prediction markets, the chief counsel to the SEC’s Crypto Task Force and a senior advisor to the chairman said he would follow the courts’ mandates.
“As someone who spent many years practicing law at law firms as well as studying the law in law school, these are complex issues as to interpretation of what it means to constitute gaming,” Selig said. “And, of course, I have the utmost respect for our judges working on these issues in our court system, and I intend to always adhere to the law and follow what judicial decisions tell me to follow.”
Legal Momentum Behind Prediction Platforms
Well, so far, the federal courts have agreed with the prediction platforms, which is why they are operating throughout all 50 states, even in those like California and Texas, where sports betting has not been legalized. However, the legalese of it all is far from finished, with the debate likely landing at the foot of the Supreme Court within the next two years.
Sportsbook Powerhouses See Promise in Prediction Market
If you can’t beat ’em, join ’em, is the age-old adage. And it can be applied to DraftKings and FanDuel’s corporate strategy of pivoting from a prediction platform adversary to an industry competitor. The prediction markets like Kalshi, Polymarket, and several others have been cannibalizing sports betting revenue from the likes of DraftKings, FanDuel, et al., yet the courts have so far ruled in their favor to do so.
DraftKings & FanDuel Enter the Space
Therefore, DraftKings has announced its DraftKings Predictions, while FanDuel has disclosed it will enter its FanDuel Predict into the prediction market industry. Both companies have been licensed through the CFTC and will be active shortly after DraftKings purchased Railbird at about the same time as FanDuel combined with the CME Group.
“Our new event contracts on benchmarks, economic indicators, and now sports will appeal to a new generation of potential participants who are not active in these markets today,” said CME Group Chairman and CEO Terry Duffy. “This launch will dramatically expand our distribution and reach, connecting directly with FanDuel’s millions of registered U.S. users.”
