Sporttrade, with State Licenses in Tow, Asks CFTC for National Approval

• Sports prediction market seeking permission to operate nationally
• It’s the first sports-only derivatives shop to seek such approval

To avoid what it describes as potential “irreparable harm,” sports betting exchange operator Sporttrade is asking the Commodities Futures Trading Commission (CFTC) to grant it permission to operate across the US.

Founded in 2018 by Alex Kane, Sporttrade currently operates sports prediction markets in Arizona, Colorado, Iowa, New Jersey, and Virginia. As such, it has gaming licenses in those states, making it the first prediction market with state-level gaming permits. Other prediction market operators, such as Kalshi, don’t focus exclusively on sports and don’t possess state gaming licenses, but they are regulated at the federal level by the CFTC.

In a letter to CFTC Acting Director Caroline Pham, Kane said Sporttrade is seeking a level playing field and that could be punished by rivals offering sports prediction markets on a national scale while not possessing state gaming licenses.

In other words, absent clarity from Congress, the permittance of sports event contracts and the incredibly large industry that would result at the federal level hinges on how one Commission, versus the next, asserts its discretion regarding ‘public interest,’” wrote Kane. “Suffice it to say: it may take some time before the CFTC determines, one way or another, whether sports event contracts are expressly permissible. This uncertainty disproportionately harms Sporttrade in our attempt to fairly compete with federally regulated derivatives clearing markets (DCMs).”

He added that his company is readying a formal no-action relief request that articulates how Sporttrade can meet the CFTC’s core principles and reporting guidelines. Kane added that there are multiple instances of the commission granting “no action relief to exchange venues to accept trades on event contracts without formal federal registration.”

How Sporttrade Differs from Kalshi, Other Prediction Markets

Sporttrade operates similarly to a traditional financial exchange, permitting clients to transact in derivatives linked to outcomes of sporting events in a way that’s comparable to how traders buy and sell stocks.

By using that methodology rather than the traditional manner of sports betting, Sporttrade enables users to buy and sell contracts on sporting events like an investor buys and sells bonds or equities. That allows users to cut losses and recoup some capital on losing wagers, something that’s impossible in standard sports betting.

The other marquee difference between Sporttrade and broader prediction markets firms is that Kane’s company directly says the product it is offering is sports wagering whereas Kalshi has run away from such proclamations. Due to its business model, Sporttrade expressly sought out state gaming licenses – something Kalshi has shown no willingness to do.

“The event contracts we would list involved gaming and as such, we would need to be regulated as a sports betting operator,” Kane wrote, referencing Sporttrade’s early days. “We did not see any other way of bringing our product to market, and this was confirmed by every state gaming regulator that we spoke with.”

CFTC Regulation Could Benefit Sporttrade

There are obvious benefits for Sporttrade in becoming a CFTC-regulated entity. Kane doesn’t run away from that fact. Operating on a national level would put the company on equal footing with the likes of Kalshi and PredictIt.

Second, the ability to run its business on a countrywide scale could be a plus for Sporttrade compared to the state-level online sports betting competition which is largely controlled by just two operators.

A CFTC-led regulatory approach for exchanges could foster a healthy and competitive environment, devoid of the monopolistic forces that dominate the state-by-state framework, encouraging a market structure that looks much more like futures trading than online casino regulation,” noted Kane in his letter to Pham.

Philadelphia-based Sporttrade is backed by some well-known investors, including Jump Capital, Delavan Lake Investments, Impression Ventures, Hudson River Trading, and Tower Research Ventures.