Nevada's top gambling regulator argued Wednesday that the Commodity Futures Trading Commission's newest event-contract framework draws an unworkable line between sports event contracts and sports betting. Speaking on a webinar hosted by the Indian Gaming Association, Gaming Control Board Chairman Mike Dreitzer said the CFTC’s treatment amounts to, in his words, an “untenable distinction without a difference.” Tribal gaming leaders on the same call challenged the claim that prediction market products represent real innovation.
CFTC proposes swap expansion for event contracts
Last week, the CFTC published a proposal to broaden the federal definition of “swap” so it includes event contracts tied to sports, politics, cultural events and weather, according to RG.org. A separate interim final rule, effective once it appears in the Federal Register, restates the agency’s position that casino-style gambling, including sportsbook wagers and casino games, stays outside that swap definition. The agency said comments on the proposed definition must be submitted through Regulations.gov within 30 days of Federal Register publication.
Peer-to-peer and cash-out arguments rejected
Dreitzer said the proposal effectively asks the public to accept that a $10 wager on the New York Giants at an online sportsbook is not the same as a $10 sports event contract. To regulators, he said, the products are the same. He also dismissed the idea that prediction markets avoid gambling because trades occur peer-to-peer. Poker, horse racing, lottery, bingo and sports betting exchanges are all peer-to-peer yet still gambling, Dreitzer noted. In practice, he said, casual customers often face hedge funds or other designated contract markets rather than other individuals, and those counterparties can take advantage of less sophisticated bettors. The only price being discovered, Dreitzer added, is the maximum amount those venues can extract from casual participants.
Dreitzer said the ability to enter and exit a position does not distinguish exchanges from sportsbooks, since online sportsbooks have offered cash-out options for years. He described arguments that prediction markets do not ban customers as false and said operators are trying to convince him that one apple is a banana. Such claims, he added, often go unchallenged on certain networks.
Innovation claims questioned
Indian Gaming Association Executive Director Jason Giles said tribes that signed prediction market deals received Kalshi’s message that this is innovation and they cannot be left behind. He said he does not see the innovation. Dreitzer echoed that concern, saying crime and deception are not innovation. He pointed out that most prediction markets allow trading from age 18 while most states with legal sports betting set the minimum at 21. Allowing 18-, 19- and 20-year-olds to wager billions in places where it violates criminal law is not innovation, he said. Dreitzer added that states should decide their own rules, and prediction markets should not dictate to Utah or Nevada without obtaining a license. Anyone participating in such markets would be ineligible to join Nevada’s gaming industry, he said.
Tribal deals raise suitability and IGRA questions
Tribal lawyer Scott Crowell said Kalshi arrangements involving the Tunica-Biloxi Tribe, Alabama-Quassarte Tribal Town and three California tribes raise questions about whether tribal gaming agencies conducted suitability reviews. He asked where the suitability determination is. Crowell said no court ruling holds that the Commodity Exchange Act overrides the Indian Gaming Regulatory Act, and courts considering the issue have said that IGRA governs activity on Indian lands and permits only activities a tribe expressly authorizes. The Alabama-Quassarte tribal chief, Samuel Marshall Jr., contradicted an October 7 announcement naming the tribe among Kalshi partners, CDC Gaming reported. Crowell also said agreements with DraftKings and FanDuel that predated prediction markets still require operators to maintain suitability.
State enforcement and court appeal
On the same day the CFTC acted, Kalshi asked the U.S. Court of Appeals for the Sixth Circuit to rehear a case it lost to Ohio and Tennessee regulators, according to CDC Gaming. The court ruled unanimously that prediction markets are not exempt from state gambling regulation, including taxes. Ohio regulators recently ordered 10 prediction markets to stop offering sports contracts in the state.
