CFTC Warns Prediction Markets: Stop Displaying Swap Prices Like Sports Betting Odds

The Commodity Futures Trading Commission (CFTC) is reminding its licensed prediction markets that they are financial exchanges, not gambling operators, and therefore should avoid displaying swap prices as betting odds.

In a warning first obtained by Bloomberg, the United States’ federal regulator of derivatives exchanges instructed prediction markets to stop displaying sports contracts in “American-style” gambling odds. The letter served as a reminder to the platforms that they must abide by all regulations under the Commodity Exchange Act (CEA).

Numerous prediction markets, as of early Friday afternoon, remained at odds of the CFTC letter, according to a Casino.org review. Platforms like DraftKings Predictions continued to display sports contracts like sports bets, with the run lines, moneylines, and over/unders for today’s MLB games displayed as +/- odds instead of share prices.

Sports Trading Defense

The CFTC continues to defend its decision to allow sports trading on prediction markets. The federal agency, which has support from the White House, argues that the Commodity Exchange Act (CEA) grants it exclusive authority to oversee sports event contracts.

The CFTC’s directive that prediction markets stop displaying contract prices as traditional sports betting odds is the regulator’s latest effort to reinforce its position amid legal challenges to that authority. While the agency’s acronym stands for Commodity Futures Trading Commission, the CFTC says it also reflects its core values: Commitment, Forward-Thinking, Teamwork, and Clarity.

“Forward-thinking,” CFTC brass say, represents the agency’s ongoing mission to “stay ahead of the curve.”

“When the CFTC was created in 1974 with the enactment of the Commodity Futures Trading Commission Act, most futures trading took place in the agricultural sector. Over the years, the futures industry has become increasingly varied and complex,” the CFTC website reads.

The CFTC prediction markets letter says displaying binary event contract outcomes as odds isn’t allowed.

For example, on an event contract for “Will it rain tomorrow?” a prediction market must offer contracts based on implied percentages, typically displayed as cents of a dollar. A trader might see shares of “yes” it will rain priced at 10 cents.

The CFTC letter cites certain prediction markets using gambling-like odds for pricing, which, for those weather shares priced at 10 cents, would be displayed as +900 or 9/1.

Legal Cases Continue

The CFTC is named in dozens of federal and state lawsuits across the country for its regulation of sports event contract trading.

State attorneys general and state gaming regulators argue such trades constitute sports betting, a privilege reserved to the states through the Supreme Court’s 2018 ruling that annulled the federal Professional and Amateur Sports Protection Act (PASPA).