This morning at 10:00am Eastern Time, the US House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development will hear expert testimony on the proliferation of sports-related event contracts offered by prediction market exchanges. Currently, sports-related prediction markets are considered to be federally regulated under the authority of the Commodity Futures Trading Commission (CFTC).
However, state and tribal gaming authorities dispute the categorization of sports-based prediction markets as “financial derivatives,” arguing that event contracts are, in essence, sports betting that should be regulated and licensed on a local level.
Thanks to Forbes contributor and gaming attorney Daniel Wallach, a portion of the testimony that will be offered later today has been uploaded to social media. The thread includes views from both sides of the prediction market debate as it relates to forecasting sports outcomes on CFTC-regulated platforms such as Kalshi, Novig, and Underdog.
Carl Kennedy is a partner and Co-Chair of Financial Markets and Regulation for Katten Muchin Rosenman LLP who specializes in the regulation of derivatives and digital assets. Kennedy’s testimony will support the CFTC’s claim that it already has authority to regulate sports prediction markets as part of the Commodity Exchange Act (CEA).
Kennedy will testify today that Congress “wrote the CEA’s core definitions of ‘commodity’ and ‘swap’ in deliberately broad terms, intending them to reach new products as those products emerged.” According to pre-released expert witness testimony for today’s hearing, Kennedy believes the CFTC should be allowed to use its own discretion on how to classify and regulate prediction market products, including those that are linked to sports outcomes.
Robert A. Schwartz is a partner within the Futures and Derivatives Practice at D.C.-based law firm Morgan, Lewis & Bockius who has spent 13 years at the CFTC. He will testify that “the CFTC has the tools it needs under the CEA to implement the policy it selects. It has powerful authority to disallow exchanges from listing problematic contracts.”
Wallach’s thread on X includes official testimony that will be provided by prominent advocates of state and tribal gaming authority over prediction markets that are tied to sports event outcomes.
Indian Gaming Association Chairman David Bean will testify that “sports betting through prediction markets tramples on the sovereignty of tribal and state governments. Gambling has always been an issue that tribes and states debate at the local level.” Bean will urge lawmakers today to “return the debate over online sports gambling to tribal and state governments.”
Christopher Cylke, Senior Vice President of Government Relations at the American Gaming Association, will provide expert testimony that supports the trade group’s stance that sports-related prediction markets represent an existential threat to the gaming industry.
“Our concern is narrow and urgent: a growing number of platforms are using so-called ‘sports event contracts’ to offer nationwide sports betting under the guise of federally regulated financial products,” according to Cylke’s testimony, which will be formally entered into the record later today. “These products function as sports wagers in every meaningful sense, yet they are being offered outside the state and tribal regulatory frameworks that Congress, states, tribes, and voters have spent decades building.”
Today’s hearing is scheduled to begin at 10:00am Eastern Time. To watch the hearing in real time, US viewers can visit the official event webpage hosted by the US House Committee on Agriculture.
Loading …
