Several U.S. senators have written to the Commodity Futures Trading Commission (CFTC) to question why the federal regulator is allowing sports event contracts to be offered by prediction markets across the U.S.
Utah, Nevada reps leading charge
Sens. Catherine Cortez Masto (D-Nev.) and John Curtis (R-Utah) and four other lawmakers wrote to CFTC Acting Chair Caroline Pham on Sept. 30 to sternly remind the Commission that it should not allow what they define as nationwide sports betting to supersede the patchwork of state and tribal gaming laws by “implicitly permitting” prediction markets to offer sports products.
Though the letter does not name Kalshi or Crypto.com directly, the lawmakers expressed concern regarding the self-determination granted to entities to offer sports products, as well as what constitutes “gaming” in the world of event contracts.
“The CFTC is expressly prohibited from allowing event contracts that involve gaming, are unlawful under federal or state law or are contrary to the public interest,” the senators wrote. The letter invoked multiple court rulings as well as laws including the Commodity Exchange Act, the Wire Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The lawmakers added that the actions of prediction market companies, as well as the CFTC’s “unwillingness” to stop those actions, contradicts both the letter and the intent of the law. The senators urged the CFTC not to “sidestep” its statutory obligations by declining to enforce Congressional prohibitions, warning that doing so risks federalizing an area of law that the Supreme Court has held is reserved to the states.
“The continued availability of illegal sport event contracts in all 50 states further reaffirms the need for the CFTC to enforce its own regulations mandated by Congress,” added the senators.
Senators want answers from Pham
In all, the six senators who put their names to the letter asked Pham to answer 11 questions about the CFTC’s actions, inactions and intentions regarding the kind of sports event contracts that are being widely offered and marketed to Americans. They want responses by Oct 23.
Those included, in summary:
- Why is the CFTC not enforcing its clear regulatory mandate?
- How is the CFTC advising firms that seek approval of sports gaming activities as event contracts?
- How is the CFTC advising contract market firms on how they must comply with state laws and tribal gaming laws, including in states where sports gaming is banned?
- How is the CFTC ensuring that markets and sporting outcomes are not manipulated?
- Does the CFTC see sports betting as entertainment or investment products for financial gain?
CFTC offers glimpse at event contracts stance
The letter was sent on the same day that the CFTC finally spoke up about sports contracts, although not much light was shed that would answer many of the senators’ questions.
The CFTC published guidance that confirmed that offering sports-related event contracts has not been evaluated by the regulator.Rather, sports contracts currently listed on prediction market sites are available through the CFTC’s self-certification process, whereby the likes of Kalshi can inform the CFTC of new markets it is offering and then put them out to consumers 24 hours later, unless the CFTC decides there is a firm reason to intervene.
The guidance did warn that entities offering sports contracts should be prepared to file paperwork with the CFTC regarding plans to potentially limit sports markets in certain states, if directed by a court to do so.
