On Friday, the Commodity Futures Trading Commission (CFTC) warned its regulated exchanges against using sportsbook-style odds when displaying prices for markets. The official communication appears to be in response to federally regulated prediction markets’ use of “American” odds that can be accessed via different user modes when accessing the corresponding apps.
“The Division of Market Oversight and the Market Participants Division of the Commodity Futures Trading Commission recently issued a letter to remind Commission-regulated entities involved in the listing, soliciting, or acceptance of event contracts of their responsibility not to mislead consumers, including the obligation to display clear and accurate pricing information for derivatives products,” says the August 7th press release.
According to the CFTC, “Registered entities and persons must uphold regulatory standards and foster clear understanding of the products offered within CFTC-regulated markets, including through the oversight of intermediary market participants, affiliates, and partners.”
In its letter to prediction markets, the CFTC added that “commission staff warned that displaying pricing information in the ’American’ odds format used by casino gambling bookmakers is likely to mislead market participants about the nature of the transaction and may deprive users of access to indicia of market depth and pricing impact.”
In other words, regulated prediction markets in the United States should display the exact price of each contract and leave out any odds that could mislead consumers. As an example, a prediction market price of $0.20 or 20¢ is appropriate for a contract that costs 20 cents and settles at one dollar if successful. However, displaying sportsbook odds, even if those are only shown in certain user-toggled options, is inappropriate.
“Market participants should display information, including pricing information, that indicates to consumers when a product is an event contract on a CFTC-regulated exchange, rather than a higher-margin, non-market-priced bookmaking product,” states the warning that was published on Friday.
The communication clearly relays the CFTC’s sentiment that prediction markets are affordably priced compared to sports bets that are made available on state-licensed apps throughout the country. This sentiment has also been repeatedly communicated through official spokespersons who represent prediction market apps like Kalshi.
One example of this could be a sportsbook bet that is “even odds” at its core (such as a Super Bowl coin flip) but is listed as a -115 wager on both sides. By contrast, both sides of a coin flip market on prediction exchanges are typically listed at exactly 50 cents per contract. Prediction markets do charge transaction fees for each trade, but those fees are generally lower than the baked-in price that a state-licensed sportsbook may offer, in the form of a wager, on the same event outcome.
State-licensed sportsbooks such as FanDuel, DraftKings, and Fanatics are continuing their efforts to phase-in prediction market products in select jurisdictions.
FanDuel Predicts, DraftKings Predictions, and Fanatics Markets are federally regulated, however. They operate on a separate platform from their sportsbook counterparts and require customers to open separate accounts even if they already have an account with each brand’s state-licensed sportsbook app.
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