The National Basketball Association (NBA) has written to the Commodity Futures Trading Commission (CFTC) to raise its concerns over sports event contracts.
The product, which allows users to trade contracts based on their predictions regarding the outcome of sporting fixtures, is available to anyone aged 18 and over in all 50 US states, via prominent prediction markets platforms including Kalshi, Crypto.com and Robinhood.
Since first being listed by Crypto.com in late December, the popularity of the sector has risen, with Kalshi accumulating more than $300m in trading volume from its March Madness markets alone, as per Business Insider.
However, the NBA has expressed its concerns over the “rapid expansion” of sports event contracts, as well as acknowledging a shift in the types of markets listed.
Originally, users were only able to trade contracts on markets linked to season-long events, such as ‘X team Pro Men’s Basketball Champion?’, but more recently, consumers can place trades on single-game markets, representing a step closer to what is, in the eyes of many, unauthorised sports betting.
The NBA’s letter to the CFTC raises questions over the federal agency’s self-certification process, which enables companies to self-certify that their internal rules and product submissions comply with CFTC regulations before going into effect.
Additionally, the basketball organisation suggested that with single-game contract markets now more commonplace, the prospect of prop bets-style markets may not be far behind.
The NBA highlighted its fear that without the kind of “sports-specific” regulatory scrutiny that comes from state-level authorities, the integrity of fixtures could come under threat.
The letter read: “This rapid expansion of sports prediction markets has occurred in the absence of the kind of robust, sports-specific regulatory framework that would aim to protect the integrity of the games being played.
“Without oversight and regulation tailored to the specific circumstances of sports wagering, 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 NBA further suggested that while the CFTC has “broad-based financial oversight”, it lacks sports-specific controls and protections that have become commonplace within the regulated sports betting market.
As a result, more sports event contracts continue to be listed via the self-certifying process, thereby placing the “burden” of post-launch reviews on the CFTC, while many markets go unchecked entirely.
The letter continued: “But for legal sports betting operators, affirmative regulatory approval from the applicable state gaming regulator is required before a new betting market can be launched 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 NBA concluded by proposing that if the CFTC does confirm sports event contracts are permitted for the foreseeable future, then the commission should adopt a “comprehensive regulatory and oversight framework analogous to those governing state sports betting markets”.
It is not the first prominent sporting organisation to make such a request to the CFTC. In March, the Major League Baseball (MLB) also urged the derivatives market regulator to establish an “integrity framework” akin to that seen in states with legalised sports betting.
The NBA’s request to the CFTC comes less than a week after Sporttrade, a sports betting exchange, asked the regulator to grant it access to a nationwide rollout, given it offers a similar product to sports event contracts but is only live in five states and considered a sports betting product.
The post NBA shares its concerns with the CFTC over sports event contracts “integrity risks” first appeared on EGR Intel.
Just shy of two months after the MLB urged the CFTC to govern the sector in a similar fashion to state-level authorities in the regulated sports betting market, the NBA outlines its stance
The post NBA shares its concerns with the CFTC over sports event contracts “integrity risks” first appeared on EGR Intel.