Michael Selig, nominated to lead the CFTC, said the legality of sports event contracts would be for the courts to decide. The report identifies prediction markets as the issue but provides no further details of Selig’s comments.
The nominee’s position leaves the legality of sports event contracts unresolved pending court decisions.
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CFTC chairman Michael Selig said he would not decide how the agency should treat sports prediction contracts, leaving the issue to courts. He cited legal questions about whether the contracts constitute gaming and said court rulings would guide the agency; the issue could reach the US Supreme Court.
Reportedly, Two federal appeals courts disagree on whether sports event contracts constitute bets. Three petitions are before the Supreme Court as Kalshi continues to record trading highs.
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.