The Commodity Futures Trading Commission has recently been inundated with letters from gaming industry trade groups and state regulators to shut down prediction market platforms engaging in the sports betting sector.
Cease-and-Desist
The pressure is mounting on the Commodity Futures Trading Commission (CFTC) to take additional action against prediction markets like Kalshi that are actively engaging in sports betting contracts throughout the nation. Unlike traditional mobile sportsbooks that are regulated and licensed by state agencies, prediction market companies are governed by a federal authority, the CFTC, and can circumvent state regulators.
Regulatory agencies from Illinois, Maryland, New Jersey, Montana, Nevada, and Ohio have all sent cease-and-desist orders to companies engaging in sports betting futures contracts, while trade organizations from Nevada and New Jersey have sent letters to the CFTC demanding the agency take punitive action against the trading firms.
Tennessee Joins the Fight
The most recent letter to the CFTC came from the Tennessee Sports Wagering Council, which also beseeched the commission to prohibit the trading platforms from operating in the sports betting market and circumventing the authority of state regulators. However, the regulatory body stopped short of sending a cease-and-desist order to Kalshi et al.
“We are writing to express our concerns with the sports event contracts currently being offered in Tennessee by Commodity Futures Trading Commission regulated entities,” read the letter. “We believe that these sports event contracts are Wagers under the [Tennessee Sports Gaming Act] and are being offered in violation of Tennessee law and regulations.
“As the Commission reviews these sports events contracts, we ask that you respect the policy decisions made by the Tennessee Legislature and not permit the offering of sports events contracts.”
Kalshi Winning Legal Battles
Although New York-based trading platform Kalshi has won the early legal rounds against the CFTC and, most recently, against Nevada regulators, the legal drama is far from finished. It is
reported the new CFTC board members are more sympathetic to Kalshi, considering Donald Trump Jr. recently announced he would serve as a consultant to the company.
The president’s eldest son posted on X after joining the firm:
“On election night at Mar-a-Lago, while biased outlets called the race a coin toss, my family and close friends used the prediction market @Kalshi to know we won hours ahead of the fake news media.
“I immediately knew I had to contribute to their mission. Today, I am proud to announce that I am joining Kalshi as a strategic advisor.
The Kalshi team has worked hard, sued the Biden administration, and achieved the impossible feat of becoming the first legal prediction market in the US. I’m excited to be a part of what they’re building.”
Gaming Industry Pushes Back
Yet, that hasn’t precluded the regulatory agencies and gaming industry trade groups from pleading their cases to the CFTC and asking for intervention. The Nevada Resort Association and the Casino Association of New Jersey have both penned letters to the federal agency and cited compelling reasons for its assistance.
Nevada’s economy is heavily dependent on the gaming industry, as evidenced by the fact that 43% of Nevada’s gross domestic product is generated by it, and 27% of its workforce is employed by the gaming industry.
Nevada Resort Association president and CEO Virginia Valentine wrote in an April 3 letter to the CFTC, “Nevada stands as the nation’s home for legal gaming, and we have spent decades offering safe, legal sports betting to Americans. Allowing for sports wagering to happen outside of state-regulated channels puts citizens at risk and endangers the critical economic support gaming provides.”
The CFTC has scheduled a roundtable discussion on the topic later this month.
