The U.S. Commodity Futures Trading Commission launched a two-pronged regulatory push Thursday, moves Chairman Michael Selig framed as the agency finally stepping up after years of inaction.
"Prediction markets are here to stay, and under my leadership, I'll protect the agency's jurisdiction over these markets and allow them to flourish in the U.S.," Selig posted on X.
Peter Hammon, an attorney and advisor in the online gaming and sports betting industry, told Decrypt that the overall picture is less dramatic than it appears.
"Selig/CFTC mostly restated current regulations without offering any opinions or new ideas and then asked for input from stakeholders," he said.
Hammon said two takeaways stood out: that Selig appears to see responsible gambling as “a serious PR problem,” and that the remarks acknowledge prediction markets are “not a novel idea,” noting similar platforms have operated under regulation in the U.S. and overseas for decades.
"There is mostly no dispute over CFTC's regulatory authority over prediction markets that don't involve sporting events," he said. "The dispute is whether or not CFTC should be allowed to classify sports prediction markets as a financial asset class, instead of as sports betting."
He noted that every other Western country with regulated gambling and financial markets opts to classify the activity as gambling.
"Maybe there is something unique to the American system or American financialization psyche," he said, "but I've yet to hear that argument articulated by stakeholders."
The advisory reminds exchanges that insider trading and manipulation rules apply to event contracts, warning that it is unlawful to “defraud” or manipulate prices, including through the misuse of confidential information.
It also flags risks in sports contracts tied to injuries or single-player actions, urging exchanges to coordinate with leagues and warning the CFTC can halt listings if contracts fail compliance standards.
"The only genuine threat to sports prediction markets is a negative Supreme Court ruling," Hammon noted.
State-level licensing has already been tried and failed, he added, "largely due to high gaming excise taxes, lack of liquidity, and cumbersome rules regarding liquidity pooling across state lines," meaning a Supreme Court loss would likely kill the business model outright.
