NBA and state regulators call for CFTC to take action on sports prediction markets
The NBA warns that prediction markets pose integrity risks.
US.- The National Basketball Association (NBA) has submitted a detailed comment letter to the Commodity Futures Trading Commission (CFTC) calling for the regulation of sports prediction markets. VP and assistant general counsel of legal governance and policy Alexandra Roth has written to acting CFTC chair Carolina D. Pham expressing the league’s concerns about the lack of a clear regulatory framework.
“The integrity risks posed by sports prediction markets are more significant and more difficult to manage than those presented by legal, regulated sports gambling,” the letter reads. “While the longest running NBA prediction markets have covered full-season events, the number and type of available markets are expanding at a rapid pace, with offerings now including single-game markets that allow users to wager on which NBA team will win a particular game.”
The letter notes that there is no CFTC division dedicated to sports-specific oversight of the new markets. Roth warns that expansion via self-certification suggests that player proposition markets or other potential markets won’t be far behind.
She wrote: “While exchanges and brokers operate under the general auspices of the CFTC, that broad-based financial oversight does not include the kind of sports-specific controls and protections that are the hallmark of state sports gambling regulations. The way new contracts come to market offers a stark contrast: exchanges can launch new, more exotic sports prediction markets via self-certification, which puts the burden of initiating any post-launch review on the CFTC and allows most contract markets to simply proceed unchecked.
“But for legal sports betting operators, affirmative regulatory approval from the applicable state gaming regulator is required before a new betting market can be launch in the first place. Likewise, as sports betting prediction markets exist today, we are not aware of any requirement that either exchanges or brokers report potentially suspicious trades or trading patterns to an affected league or cooperate with any league-run investigations into such suspicious activity; nor are we aware of any mechanism that would require ongoing information sharing between exchanges and affected leagues.”
The letter concludes: “We encourage it [CFTC] to close this gap and to adopt a comprehensive regulatory and oversight framework analogous to those governing state sports betting markets, and to impose meaningful limitations on the continued expansion, via self-certification, of these markets into ever more exotic and narrow event propositions.”
MGCB submits comments
State gambling regulators have also called for action. The Michigan Gaming Control Board (MGCB) executive director Henry Williams wrote in a letter to Pham that the regulator sees sports event contracts as equivalent to online sports wagers.
Williams said: “The offering of sporting event contracts by CFTC-regulated entities, without adherence to Michigan’s licensing requirements and in a manner that may not meet prescribed consumer protections, exposes Michigan residents to unnecessary risk and undermines public trust. We are particularly concerned that such contracts are being promoted as investment opportunities, a message that directly contradicts Michigan’s responsible gaming principles.”
