The NBA sent a letter to the U.S. Commodity Futures Trading Commission (CFTC) sharing its concerns regarding the prevalence and popularity of sports prediction markets.
Acting CFTC Chair Carolina D. Pham received the letter from the NBA detailing the rise of sports prediction markets offered by platforms like Kalshi and Crypto.com. In the letter, the NBA expresses its concerns over the infancy of NBA prediction markets offered across CFTC-backed exchanges. The league also has concerns regarding the evolution of NBA markets with full-season events offered in the early stages of sports prediction markets.
The platforms now offer single-game event contracts through self-certification, but the NBA is already looking ahead and anticipating player prop markets or other performance-based markets are coming soon.
The prediction markets are rapidly expanding without a clear regulatory framework.
“The integrity risks posed by sports prediction markets are more significant and more difficult to manage than those presented by legal, regulated sports gambling,” said VP and Assistant General Counsel of Legal Governance and Policy Alexandra Roth in the letter.
The NBA considers legal sports betting a better avenue for basketball fans to engage with the league due to the standards put in place by gaming regulators across the country. The league believes regulated wagering has the proper oversight and integrity protections.
“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,” continued Roth.
The league is encouraging the CFTC to create a similar regulatory framework for prediction markets.
“We encourage it [CFTC] to close this gap and to adopt a comprehensive regulatory and oversight framework analogous to those governing state sports betting markets, and to impose meaningful limitations on the continued expansion, via self-certification, of these markets into ever more exotic and narrow event propositions.”
The NBA is also seeking the opportunity to meet with the CFTC to discuss sports prediction markets and ways to mitigate integrity risks. The NBA joins MLB as a professional sports entity seeking regulatory clarity regarding the offering of sports event contracts.
MLB sent a letter in March to the CFTC asking the commission to create an “integrity framework” around sports event contracts due to their resemblance to sports betting.
A prediction market seeks CFTC approval
Earlier this week, Sporttrade took the proactive step in gaining favor from the CFTC by reportedly asking the commission for authorization to offer sports event contracts.
Sporttrade requested CFTC approval to avoid “irreparable harm” as it only operates in five U.S. markets. By comparison, Kalshi offers event contracts to users in all 50 states.
Sporttrade offers prediction markets in the five U.S. states it holds a gaming license. The states where it operates are Arizona, Colorado, Iowa, New Jersey and Virginia.
In order to gain CFTC approval, Sporttrade must register with the commission and also become a member of the National Futures Association (NFA). Once Sporttrade is an NFA member, the CFTC ensures the company complies with its regulations before a final review and approval. Sporttrade is also subject to ongoing supervision and background checks.
