CFTC Warns Prediction Markets Over Moneyline Odds

The CFTC is advising prediction markets to mind its use of US sportsbook-style moneyline odds on their online platforms.

In a letter obtained by Bloomberg, the Commodity Futures Trading Commission warned major players like Polymarket and Kalshi to stop using American-style gambling odds in its popular markets.

The CFTC has been a clear protector of prediction markets this year, via a set of high-profile battles against state regulation.

However, in a marked turn of direction, the CFTC is keen to avoid playing into the hands of state regulators who want to clamp down on prediction markets.

CFTC Warns Against ‘Deceptive Practices’

The major prediction markets offer a range of wild and wacky events to trade on in. These go from predicting the time of Donald Trump’s departure to the next Best Picture Oscar winner.

However, increasingly, Kalshi and Polymarket are moving into territory traditionally held by online sportsbooks. You can now trade event contracts on the winner of the Super Bowl, the Friday night game, or any number of player props.

The move has angered many states, including Michigan and New Jersey, who maintain only they can allow “sports betting”.

While the CFTC has countered cease-and-desist letters with a raft of lawsuits, on this issue it seems to agree. Prediction market platforms are now under order: don’t make your sites look, feel and act like online sportsbooks.

Prediction Market Growth Unbowed

Since prediction markets came under the CFTC’s regulatory wings – protected by the Commodity Exchange Act (CEA) – platforms have exploded.

Kalshi is valued at around $22 billion following an investment push earlier this year. Over $1 billion was traded among its global customers on the recent FIFA World Cup.

However, Kalshi et al will have to fight more battles if they are to continue trading in the U.S.

Multiple states have been bringing lawsuits against the markets, ranging from gentle cease-and-desist orders to full-blown court actions.

Washington State is the latest to block prediction markets, with a county judge issuing an injunction against Kalshi in the state. For now, Washington residents can access alternatives.

Prediction market platforms are able to geofence their sites in states where they have fallen foul of the regulators.

Nowhere is this more evident than in Utah. The state has had a staunch anti-gambling stance for decades, and this stretches to prediction markets.

Kalshi’s lawsuit against the Beehive State ultimately failed, meaning residents in Utah won’;t be able to buy shares in Taylor Swift’s wedding or the next primaries.

Novelty Bets Under Fire

It’s not just sportsbook-style markets that are coming under fire from lawmakers. Last week, six senators filed a joint letter to the CFTC demanding they rein in trades on wildfires.

The markets allow traders to bet on weather patterns and the level of destruction. However, senators argue those markets encourage arson – a rather morbid version of insider dealing that prediction markets are keen to stamp out.