The American Gaming Association (AGA) is calling on the U.S. government to ban prediction market exchanges from providing event contracts related to sports. 

A significant danger to the regulated sports betting sector has arisen with wagering exchanges that permit users to stake money against each other on various topics, from the weather prediction to the value of bitcoin. The digital platforms assert they provide derivatives, or financial tools that are exchanged as investments. 

The Commodity Futures Trading Commission (CFTC), a federal independent agency regulating derivatives markets, is assessing the optimal way to oversee prediction markets and the legal status of contracts related to sports events. 

AGA President and CEO Bill Miller wishes for the CFTC to prevent prediction exchanges such as Kalshi, Crypto.com, and Robinhood from selling sports contracts. Describing the choice as “crucial” and backing the forecast that sports-related contracts would “undermine years of state-led advancements in sports betting regulation,” Miller endorses prohibiting such arrangements. 

“The CFTC must reject the classification of sports event contracts as investment products and reinforce the integrity of the existing state-regulated sports betting market. Anything less risks destabilizing a system carefully built to balance economic opportunity with consumer protection and support for states and communities,” Miller wrote in an op-ed published in the Sports Business Journal. 

“The CFTC must act now to protect states’ rights and prevent an unregulated national betting market from taking root,” the AGA leader continued.

Investments or Wagers? 

The distinction between gambling and investing blurred with the advent of the internet, which popularized electronic trading platforms. Warren Buffett, one of the most successful investors in history, remarked last autumn that the “markets today display much more casino-like tendencies than they did in my youth.” 

Kalshi and comparable platforms assert they merely permit individuals to wager money on event outcomes, similar to how investors allocate funds purchasing company shares based on their expectations of the next quarterly report's performance. Miller, nonetheless, argues that forecasting the result of a sports event is undeniably tied to betting.

"These platforms argue that these contracts are investment vehicles, not wagers or bets. This is sports betting, and if you don’t believe it, their own advertising presents it quite clearly,” Miller wrote.  “The reality is that this effort amounts to a backdoor for national sports betting that threatens state authority, consumer protections, and the integrity of the legal sports betting industry.” 

Upcoming Roundtable 

The CFTC plans to conduct a "prediction markets roundtable" later this month. A date has not been determined yet. 

The CFTC has been receiving feedback from stakeholders since the beginning of last month. Groups that expressed support for the CFTC's ban on sports-related prediction market contracts, alongside the AGA, comprise GeoComply, a geolocation company that aids mobile sportsbooks in identifying the locations of their bettors. Major League Baseball, the Indian Gaming Association, and US Rep. Dina Titus (D-Nevada) have likewise urged for a prohibition. 

CFTC Acting Chair Caroline Pham has voiced her disapproval of sports contracts on prediction markets. 

“Unfortunately, the undue delay and anti-innovation policies of the past several years have severely restricted the CFTC’s ability to pivot to common-sense regulation of prediction markets,” Pham said last month. “Despite my repeated dissents and other objections since 2022, the current commission interpretations regarding event contracts are a sinkhole of legal uncertainty and an inappropriate constraint on the new administration.”