As prediction markets fight intensely in court to continue offering sports event contracts in a number of leading states, the battle could shape the future of US sports betting for the better part of the next decade.
On Monday, several industry CEOs made a rare public appearance at a round table on SEC-CFTC harmonisation. For months, sports wagering insiders eagerly anticipated the event to gain insight on how the US Commodity Futures Trading Commission could modify federal regulations on prediction markets.
Although the CFTC and the US Securities and Exchange Commission outlined numerous measures that could result in further collaboration, the participants barely addressed prediction markets at the four-hour event. In many respects, the executives spent more time cracking jokes than discussing prediction market regulation.
Three executives, Tarek Mansour of Kalshi, Shayne Coplan of Polymarket and Terrence Duffy of CME Group, appeared on a panel on how regulatory harmonisation efforts could unlock economic value for platforms across the industry. Two others, JB Mackenzie of Robinhood Markets and Nick Lundgren of Crypto.com, appeared on another that addressed how the initiative could reduce costs for investors.
For the most part, however, stakeholders who looked for insight on regulatory changes for prediction markets came away thirsting for more.
Lighthearted moments
Last month, the CME Group signed a groundbreaking partnership with FanDuel. Under the deal, the two will form a joint venture to create event contracts on certain derivatives on oil prices, index trades and economic indicators such as the national GDP. At Monday’s appearance, Duffy made a brief reference to the FanDuel joint venture in passing.
Duffy told the audience that he had spent little time inside a Las Vegas casino on a trip to Sin City over the weekend. Instead, he was preoccupied with his trades on Kalshi, a new prediction market.
It prompted Mansour to ask whether Duffy closed out of his trades by turning a profit. “You made money, I broke even,” Duffy responded with a laugh. “There’s a lot of fees over there, buddy.”
Coplan, 27, also brought the jokes to Monday’s round table. The Polymarket CEO playfully jousted with his elders in poking fun at their incumbent status. When several panellists chided Coplan on his age, he retorted, “If you can’t find me after this, contact my attorney.”
Little clarity on key regulation
However, the round table never broached CFTC Rule 40.11 that prohibits event contracts on matters such as terrorism, war, assassination and gaming. Polymarket, for instance, offers contracts on whether Hamas will release all of the captive Israeli hostages by 31 October.
The industry has sought clarity on the regulation, as a host of jurisdictions have filed litigation against prediction markets, claiming they run afoul of state laws.
In the day’s final session, SEC Commissioner Hester Peirce told the audience of an angry call she received from an Auburn football fan earlier this month. Peirce noted that she received the call following Auburn’s loss to Oklahoma on 20 September.
Irked by a non-call on a possible unsportsmanlike conduct penalty, the fan apparently called the wrong SEC. Peirce indicated that the fan should have instead called the CFTC in a nod to sports event contracts.
Unsettled matters
The round table opened with a brief address by SEC Chairman Paul Atkins, a rumoured candidate to be nominated by President Donald Trump for the same position with the CFTC. Atkins remains a long shot due to a provision in the Securities Exchange Act that prohibits the chairman from leading another government agency at the same time. Atkins noted that the two agencies are focused on collaboration rather than a merger, which would require approval from the executive and legislative branches.
“Fanciful talk of reorganising the government risks distracting us from the monumental opportunity we have in front of us,” Atkins said in prepared remarks. “What matters is building a framework where our agencies coordinate seamlessly, reduce duplicative regulation and give markets the clarity they deserve.”
Both Mansour and Coplan indicated that they are in favour of regulations that create a level playing field for all participants. Mansour stressed the importance of self-certification for certain markets in the current environment. He emphasised that if Kalshi has to wait due to regulatory uncertainty, impatient customers will simply go offshore. Harmonisation between the SEC and CFTC could help with that.
CFTC interim Chair Caroline Pham spoke near the start of the round table, but also barely addressed prediction markets. Pham has stated that she plans to leave the agency when a new chair is confirmed. Brian Quintenz, the president’s current nominee, has seen his confirmation vote delayed twice this year. As a result, the White House has reportedly begun the process of vetting new candidates to lead the nation’s regulator on derivatives.
While panellists spent hours discussing harmonisation between the SEC and CFTC, little time was spent on prediction markets.