Nevada Gaming Control Board questions CFTC’s prediction market rules

Nevada's chief gaming regulator said he expected the Commodity Futures Trading Commission to push ahead with its prediction-market overhaul. Mike Dreitzer, who chairs the Nevada Gaming Control Board, told the Indian Gaming Association's weekly webinar on Wednesday that the agency has been acting in concert with designated contract markets. He called the line the CFTC draws between event contracts and sportsbook wagers "an untenable distinction without a difference." The commission released two proposals late last Friday, one of which would classify event contracts as swaps under federal law and bar traditional gambling.

One of the two proposals broadens the swap definition so that it reaches event contracts, among them contracts linked to cultural events, weather, politics and sports. The other is an interim final rule that takes effect when it is published in the Federal Register; it restates the agency's long-held view that casino-style gambling, sportsbook wagers and casino games included, sits outside the swap definition.

Kalshi asked the U.S. Court of Appeals for the Sixth Circuit for a rehearing in its case against regulators in Ohio and Tennessee, filing the request the same day the CFTC acted on its swap definition. A unanimous panel had sided with the states, concluding that prediction markets must still answer to state gambling rules, taxes among them.

According to Dreitzer, the CFTC's rulemaking asks the public to accept that a $10 wager on the New York Giants placed through an online sportsbook is not the same as a $10 contract on a sports event. The NGCB sees no difference between the two, he said.

A lawyer who previously held senior posts at Gaming Arts and Ainsworth Game Technology, Dreitzer argued that the industry does not push back hard enough on prediction markets' contention that they are peer to peer rather than gambling. Poker, horse racing, the lottery, bingo and sports betting exchanges all involve peers, he noted, yet none of that stops them from being gambling. He added that a casual bettor frequently faces a hedge fund or another designated contract market across the trade, and that sometimes the designated contract market itself creates a third-party firm to take the other side, a practice he labeled bookmaking.

Dreitzer also disputed the argument that prediction markets differ because users can get in and out of a position, saying online sportsbooks have offered cash-in and cash-out for a long time and that this does not make the activity different from sports betting. He was joined in the hour-long discussion by Scott Crowell of Crowell Law Office and the Tribal Advocacy Group, IGA conference chairman Victor Rocha and IGA Executive Director Jason Giles.