The Commodity Futures Trading Commission (CFTC) has issued a warning to prediction market operators regarding the use of traditional “American-style odds” for sports-related event contracts, although many platforms have yet to adhere to the alert at the time of writing.
The Commission’s warning was sent amidst growing legal scrutiny of how prediction markets are currently regulated, as the CFTC remains in court battles across states such as Minnesota, Wisconsin and Michigan.
According to the warning, operators of prediction market platforms are meant to list contracts using share or percentage pricing on yes/no-based outcomes and are required to abide by regulations included within the Commodity Exchange Act.
For Major League Baseball (MLB) games scheduled on August 7, however, many prediction markets have continued to list contracts related to run totals, money lines and over/unders were still utilizing odds such as +100 or -100.
In additional legal news, Novig filed a federal lawsuit against New York Attorney General Letitia James and Governor Kathy Hochul just one day after launching its own prediction markets platform, citing impending legal action from the Empire State regulators.
James and Hochul filed a lawsuit against Kalshi on July 30, requesting the operator forfeit all alleged illegal profits, provide restitution to affected consumers and pay civil penalties equal to three times the gains the company earned through its unlawful conduct.
“Kalshi has chosen to ignore New York’s gaming laws, which exist to protect consumers, prevent problematic gambling, deliver funding for critical public services, and ensure that every company plays by the same rules,” Hochul said.
“This choice has consequences, and working closely with Attorney General James, New York is taking action to stop this illegal behavior and bring Kalshi into compliance, because no company is above the law.”
The Governor also alleges Kalshi failed to obtain a license from the New York State Gaming Commission, allowing the operator to avoid state licensing and tax requirements.
Nine US senators have urged the CFTC to restrict prediction market contracts tied to wildfires on August 4, citing concerns that financial incentives could encourage manipulation of active fires
