Data and integrity firm Genius Sports supports prediction markets offering sporting event contracts, but only if the Commodity Futures Trading Commission (CFTC) implements stringent integrity protections.
Genius authored a letter to the CFTC last week in which it recognized sports event contract trading as “an area of significant potential growth and innovation.” The company urged the commission to lean on its expertise to help better regulate Designated Contract Markets (DCMs).
“As experienced stakeholders in regulated sports betting markets, we deeply understand the importance of structuring sports-related products around clarity, consistency and integrity for the offerors of such products, services providers and end users,” wrote Genius Sports Chief Legal Officer Tom Russell,..
“We believe that it is critical — as DCM-offered sports event contract markets grow — for the CFTC to consider and evaluate the protections unique to the state-based sports markets regulatory regimes, especially protections around sports integrity. Ensuring data integrity and the integrity of the underlying sporting events is essential to validating and being able to conclude that a sports event contract is not readily susceptible to manipulation.”
Russell added that Genius, which works with a range of online sportsbooks for typical digital sports wagering, believes it is “practical” to acknowledge that DCM-listed sports contracts in many respects equate to the kind of wagering taking place in state-licensed sports betting markets.
Genius Sports’ letter opined that risk mitigation and prevention is a vital piece of the puzzle that needs to be addressed by the CFTC and operators of sports event trading such as Kalshi, Robinhood and Crypto.com.
Other observers highlight integrity risks
Genius Sports added that it agrees with sports organizations and other observers’ suggestions that integrity risks will increase exponentially if and when sports event contracts further expand to include markets that resemble things such as in-play betting and player props.
Back in March, MLB wrote to the CFTC to implore the federal derivatives regulator to establish an “integrity framework” around sporting event contracts to replicate the kind of safeguards that states implement around sports wagering.
MLB EVP of Legal and Operations Bryan Seeley opined that, while leagues have partnered with sportsbooks, regulators and integrity monitoring firms to track betting activity, prediction markets are not required to meet the same reporting standards.
Last month, the NBA sent its own letter to the CFTC in which it expressed concerns over the rapid expansion of NBA prediction markets offered across trading exchanges. “The integrity risks posed by sports prediction markets are more significant and more difficult to manage than those presented by legal, regulated sports gambling,” wrote NBA VP and Assistant General Counsel of Legal Governance and Policy Alexandra Roth.
In its letter last week, Genius Sports noted that it would welcome the opportunity for further consultation with the CFTC, including any roundtables or other discussions that may be held in the future. A roundtable was set to be hosted by the CFTC in April but after weeks of taking comments from the likes of MLB and the NBA, the event was quietly canceled. The CFTC did meet with tribal leaders last week to hear their concerns about the emergence of sports-related event contracts.
