CFTC Chairman Michael Selig said the commission would support lawful prediction markets and sports event contracts at a joint event in Washington, DC. He is withdrawing a 2024 proposed prohibition on political and sports contracts and an internal advisory, and plans to develop rules for event contracts.
The planned rules could change the regulatory framework for prediction-market operators and sports event contracts in the USA.
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Acting CFTC chair Caroline Pham said prediction markets align with market oversight principles and linked them to the wider development of tokenized finance. The CFTC has not issued a conclusive ruling on whether sports-outcome contracts fall under federal futures oversight or state gambling laws, while states have challenged platforms including Kalshi.
Reportedly, the Indian Gaming Association's conference chairman addressed how tribes are responding to the growth of sports event contracts from prediction markets. The spread of such contracts creates uncertainty for federally recognised tribes, prompting discussions about the next steps in the fight.
North American Derivatives Exchange, which operates Crypto.com's OG prediction market, and Ludlow Exchange, Novig's operator, filed separate lawsuits on 16 October challenging Missouri's 21-year age minimum and 10% tax on sports event contracts. Both argue that federal commodities law gives the CFTC authority over their contracts, pre-empting state gambling rules, after a 30-day compliance period following cease-and-desist notices expired. Missouri Attorney General Catherine Hanaway's office maintains that labelling a sports bet an event contract does not remove it from state law.
North American Derivatives Exchange, which operates Crypto.com's OG prediction-market platform, and Ludlow Exchange, the operator behind Novig, filed separate lawsuits on 16 October challenging Missouri's sports event contract rules. The filings followed the expiry of a 30-day compliance period set out in cease-and-desist notices. Both companies argue that federal commodities law gives the Commodity Futures Trading Commission authority over their contracts, putting them outside Missouri's gambling requirements.
Underdog filed a federal lawsuit against Connecticut officials after the state Department of Consumer Protection ordered it and eight other companies to stop offering or advertising sports-event contracts and let users withdraw existing funds. The company asked the court to block state enforcement, arguing that federal law gives the Commodity Futures Trading Commission authority over its event contracts; Connecticut officials say the contracts breach state gaming rules.
Joe Webster, a partner with Hobbs Strauss, expects the US Supreme Court ultimately to resolve sports event contract disputes. Webster said some 80 cases had been filed across state and federal courts, with about 85% of decisions going against prediction markets.