The National Football League (NFL) is calling on the U.S. Commodity Futures Trading Commission (CFTC) to enhance regulations governing sports prediction markets, as detailed in a letter dated July 27.
The NFL emphasized that maintaining the integrity of the games is its top priority. The league believes that the proposed rules from the CFTC do not provide adequate protection for both the competitions and the participants in trading.
Manipulation Concerns
The NFL has suggested limiting contracts on events that can be influenced by an individual or a small group. Examples include bets on a kicker missing a field goal or a quarterback's first pass being inaccurate.
Additionally, the league asked the CFTC to clarify the definition of contracts that cannot be meaningfully separated from gambling.
NFL representatives criticized the potential exemption for markets related to awards and voting, arguing that this could enable platforms to circumvent restrictions by incorporating a formal voting or award element into sports contracts.
For instance, The Block highlighted the market for the Offensive Player of the Year award, where the outcome is determined by a voting panel, yet the subject matter is linked to player performance.
Insider Information
Another set of recommendations focuses on the use of significant non-public information. The NFL urged the CFTC to explicitly state that trading sports contracts based on confidential data from the league, teams, or affiliated parties should be regarded as manipulative or deceptive practices.
The authors of the letter also proposed mandatory lists of individuals prohibited from trading contracts related to specific events. The NFL believes that platforms should not solely rely on their internal controls.
Moreover, the league reiterated previous demands: a ban on margin trading, advertising restrictions, additional user protection measures, and a minimum age requirement of 21 years.
CFTC and State Disputes Continue
Questions regarding the regulation of prediction markets at both federal and state levels persist. CFTC Chairman Michael Selig maintains that the agency has "exclusive jurisdiction" over the sector, as event contracts fall under the category of swaps. However, states argue that platforms are violating local gambling laws.
This dispute has put Kalshi in a difficult position as the CFTC required the platform to settle transactions for Michigan residents as usual, despite a state court ruling at the end of June mandating the cancellation of those transactions.
At the end of July, a U.S. federal court temporarily prohibited Minnesota from enforcing a new law against platforms registered with the CFTC. Kalshi and Polymarket US will continue to operate in the state until the dispute is resolved. The judge determined that some event outcome contracts may fall under the exclusive jurisdiction of the CFTC.
Industry organizations have also expressed dissatisfaction. American gambling associations have urged the U.S. Senate to ban prediction markets related to sports and gambling.
In the context of the World Cup, Kalshi and Polymarket have surpassed traditional U.S. sportsbooks. In June, Kalshi's trading volume exceeded $31 billion, a 70% increase from May. According to Dune, sports contracts accounted for 85% of the platform's turnover.
The international platform Polymarket set a new monthly record with $10.8 billion, while its regulated U.S. version raised $3.5 billion.
Source: The Block.It is worth noting that in June, Kentucky authorities filed lawsuits against Kalshi and Polymarket, accusing the platforms of conducting unlicensed sports betting under the guise of prediction markets.