Commodities futures contracts exclude trading contracts on elections, awards, and sporting events, but the US sports betting industry would like that changed and is hoping it can convince the Commodity Futures Trading Commission.
Change the Rule
The sports betting industry wants a rule in place so that it can hedge its bets. However, the Commodity Futures Trading Commission (CFTC) wants to stipulate “gaming” as contrary to public interest. Countering that is the Sports Betting Alliance (SBA), a lobbying group whose members include BetMGM, DraftKings, FanDuel and Fanatics that wrote to the CFTC the following:
“We respectfully urge the CFTC to refrain from approving this rule in its current form due to its unconditional nature and its potential harm to a multi-billion-dollar industry and the tens of millions of consumers that currently enjoy legal regulated betting on sporting events,” SBA President Jeremy Kudon wrote in an Aug. 7 letter to the CFTC.
“We believe that with further examination and open dialogue, a more nuanced approach can be developed that safeguards the public interest while supporting the stability and growth of the regulated sports betting industry.”
What Does the SBA Want?
The SBA is asking the regulatory body to consider three objectives.
Make clear the line of demarcation, if any, between legalized sports betting and gaming with the proposed rule “in order to prevent any potential destabilization of state-regulated sports betting.”
As the CFTC’s rule stipulates gaming is contrary to the public interest, the SBA would like that reversed and the CFTC to confirm that “gaming itself is not contrary to the public interest, as demonstrated by the widespread adoption of the activity across the country.”
The SBA wants the sports betting industry access to an accepted method of reducing risk, stating, “an institutional futures market accessible to licensed sports betting operators,” which would legally allow sportsbooks to buy and sell futures contracts to hedge their bets.
This would be akin to the sportsbook taking World Series or Super Bowl bets and selling those in a package to another sportsbook to minimize its exposure.
The SBA’s Kudon wrote, “Currently, the proposed rule overlooks the compelling economic purpose that an institutional futures market could serve in allowing operators to hedge commercial risks.
“Labeling any contracts involving gaming as categorically contrary to the public interest will limit the industry’s hedging ability, a move that we believe has not been sufficiently considered by the CFTC. We object to the proposed rule to the extent it forecloses an institutional futures market for this purpose.”
Support and Additional Advocacy
But the Sports Betting Alliance is only one group advocating for the CFTC to accept these proposals, as the American Gaming Association (AGA) has also launched its own lobbying effort with those three objectives as its clarion call to action.
“And finally, 38 states and Washington, D.C. have decided that some form of regulated gaming is in their public interest; the Commission should not undermine those conclusions,” wrote Christopher Cylke, senior vice president of government relations for the AGA.
“The AGA stands ready to engage with the CFTC to ensure regulations allow for appropriate innovation and product development to meet the bona fide commercial needs of the sports betting ecosystem as it continues to mature.”
