CME Group chair and CEO Terry Duffy has said prediction markets on sports are “gambling”, while raising concerns over recent novelty markets waved through by the federal derivatives regulator.
Speaking on the company’s Q2 earnings call on Wednesday, 22 July, Duffy said he expects the question regarding the legality of sports event contracts to eventually reach the US Supreme Court.
CME Group offers prediction markets via three brokers: FanDuel Predicts, DraftKings Predictions and Interactive Brokers.
CME Group and FanDuel, the Flutter-owned online sports betting and igaming giant, formed a JV to launch FanDuel Predicts last December.
FanDuel Predicts initially launched with a handful of sports markets, as well as financial benchmark markets.
Those financial markets, which went live in all 50 US states, included “benchmarks such as the S&P 500 and Nasdaq-100, prices of oil and gas, gold, cryptocurrencies and key economic indicators”.
Sports event contracts are not available on FanDuel Predicts in US states with legalised sports betting, or on tribal lands.
In June, FanDuel Predicts partnered with Crypto.com to add a slew of new sports event contracts to its platform, including deepening the combos offering. Combos are akin to bet builders or same game parlays in sports betting.
Speaking to analysts, Duffy said: “Prediction markets [are] interesting. There seems to be a lot of activity. We’ll try to keep the sports out of it because I’ve been pretty public about this.
“A lot of these prediction markets on sports are gambling, and I think that that is going to find its way to the Supreme Court, and that is not something that we want to be a part of participating in right now.
“As I said earlier, I think a lot of these contracts are susceptible to manipulation when they list some of these small parlays and things of that nature. Those are not markets. Those are gambling.”
In a statement issued to Sportico, a CME Group spokesperson said: “What has always excited us about our FanDuel partnership is the opportunity to get our financial markets in front of their [12 million] registered US users.
“We also offer some sports products that meet regulatory standards as event contracts.
“Today, Terry referenced the sports-related contracts – like individual performance, combos and parlays – that sportsbooks and prediction market apps offer, but CME Group does not.”
Duffy will be replaced as CME Group CEO next March by CFO Lynne Fitzpatrick. Duffy will move up to become executive chair.
CME Group has consistently been self-certifying sports event contracts with the Commodity Futures Trading Commission (CFTC). Those include markets around the World Cup, tennis, golf and college football.
Self-certification is completed via 40.2 filings, with CME Group also engaged in a battle with the CFTC over its oil market contracts.
On 9 July, the CFTC exercised its authority to stay a listing of a contract that would allow the CME Group to “initiate 24/7 trading on crude oil futures”.
At the time, CFTC chair Michael Selig said: “As I’ve said repeatedly, we do not take a one-size-fits all approach to 24/7 trading.
“CME’s decision to disregard the Commission’s effort to undertake a reasoned analysis of the critical issues at stake is wholly inappropriate and necessitates Commission action to stay the certification.
“The Commission encourages exchanges to work with agency staff to address potential legal issues before seeking to list novel contracts.”
CME Group is also suing the CFTC for allowing Kalshi to launch perpetual futures, often referred to as ‘perps’, on its platform.
Perps are a type of derivative which allows speculation on the price of an asset without actually owning it.
Duffy also took aim at the CFTC for approving markets around the annual Nathan’s Hot Dog Eating Contest in Coney Island, New York and not CME Group’s new oil market, dubbing it “ridiculous”.
He continued: “I don’t want to get into too much of the idiosyncrasies of some of the products they have not stayed.
“Let’s just talk about the Fourth of July contract they [the CFTC] did not stay on a 40.2, which was Nathan’s Hot Dog Eating Contest. That was actually a contract that went through, and I guess that had an economic interest to somebody. I’m not sure who.”
On Kalshi, almost $11.5m was traded on the winner of the competition, which was won by professional eating champion Joey Chestnut.
The post CME Group CEO calls sports event contracts gambling and queries CFTC on novelty markets first appeared on EGR Intel.
Terry Duffy expects prediction markets on sports to end up in the Supreme Court, while he also questions the economic utility of allowing trading on Nathan’s Hot Dog Eating Contest
The post CME Group CEO calls sports event contracts gambling and queries CFTC on novelty markets first appeared on EGR Intel.