The Commodity Futures Trading Commission (CFTC) has called on prediction markets operators to engage with leagues and official entities to bolster regulatory oversight.
The advisory note, penned by acting director of the CFTC’s division of market oversight, Frank Fisanich, has laid out how prediction markets can better protect against insight issues.
Fisanich’s note placed responsibility firmly at the forefront of how prediction markets platforms manage risk associated with their offerings.
It read: “As frontline regulators, designated contract markets should be proactive, ensuring proper surveillance and oversight of trading in all of the products that they list, accounting for the particular characteristics and attributes of each product.”
The advisory note also highlighted that designated contract markets (DCM) must adhere to several core principles, including Core Principle 3, in which platforms have a “specific statutory obligation” to trade “derivative contracts that are not readily susceptible to manipulation”.
The note continued: “DCMs are encouraged to consider whether certain categories of event contracts create a heightened potential for manipulation or price distortion.
“For example, in the context of sports-related event contracts, such contracts could involve those that resolve or settle based on injuries to individual sports participants, unsportsmanlike conduct, or physical altercations between sports participants, as well as contracts that resolve or settle based on the action of a single individual or a small group of individuals, such as officiating actions occurring during a sporting event.”
Fisanich went on to suggest prediction markets operators should engage with leagues, data sources and other integrity bodies to support these aims.
Those engagements include establishing “information-sharing and data arrangements with the relevant sports integrity monitoring organisation” and “relying on official data provided by the relevant league or governing body, as applicable, as the settlement source”.
Speaking to business TV channel CNBC, CFTC chair Michael Selig said: “For example, an injury contract, that’s something that our guidance discusses. It’s manipulable. There’s a real risk a player could go out and try to injure another player to collect on an event contract.
“That sort of thing is the responsibility of the exchanges as the first line to evaluate. These are contracts that have real manipulation risk.”
Reacting to Fisanich’s advisory note on LinkedIn, Genius Sports CEO Mark Locke said: “We welcome the CFTC’s recommendation today for the use of official sports data as the settlement source for prediction markets.
“There is nothing more reliable than league-approved official data – collected in-venue, in real time and verified at source. It is now clear the CFTC recognises the critical role official data will play.”
The post CFTC highlights manipulation concerns around specific sports event contracts first appeared on EGR Intel.
Chair points to injury markets as an example, as regulator asks operators to self-regulate and engage with leagues and other bodies
The post CFTC highlights manipulation concerns around specific sports event contracts first appeared on EGR Intel.