CFTC Updates Guidelines on Sports Prediction Markets

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CFTC Issues New Guidelines for Prediction Markets

The Commodity Futures Trading Commission (CFTC) recently issued new guidance for prediction markets, impacting platforms like CalSci, Polymarket, FanDuel, and DraftKings. The CFTC's guidance, delivered through a notice from the Division of Market Oversight and advisory guidance, emphasizes that these platforms should not offer contracts that could be easily manipulated, such as those based on sports injuries or officiating decisions.

Chairman Michael Selig clarified some examples of potentially manipulable contracts when pressed by CNBC. While not definitive, these examples included betting on sports injuries and officiating decisions, which could be influenced by individuals seeking financial gain. However, Selig noted the guidance's vagueness, only hinting that certain player props might be considered easily manipulated depending on individual performance.

The CFTC has been asserting its authority over sports prediction contracts against state claims that categorize these as sports betting. Despite this assertion, the commission has reiterated the need for platforms to self-regulate and police their own offerings. Additionally, a notice of advanced rulemaking was issued by the CFTC, inviting comments on defining the scope of future regulations for sports prediction markets.

The push for self-regulation was further emphasized by suggesting collaborations between prediction markets and sports leagues, akin to the partnerships formed with sportsbooks that use official league data to verify market outcomes. The guidance implies that integrating such official data might not only enhance market integrity but also prove lucrative for the leagues.

This call for using official data mirrors concerns raised by Major League Baseball and the NBA about the potential markets on their events, reflecting their desire to capitalize on or control these emerging markets. The final period for comments will last 45 days, after which the CFTC is expected to finalize its regulations regarding prediction markets.