The Commodity Futures Trading Commission (CFTC), a top US financial regulator, says it is teaming up with Major League Baseball and other sports leagues to halt insider trading on prediction markets.
The regulator has vowed to work with sports bodies to flag suspicious trading activity and crack down on attempts to manipulate sports-related contracts on platforms like Kalshi and Polymarket.
The CFTC has already sealed a memorandum of understanding deal with the MLB, said the regulator’s chairman Michael Selig. Selig was speaking at this year’s Financial Industry Regulatory Authority conference, the media outlet CoinDesk reported.
“We are in talks with all the professional sports leagues,” Selig added.
The CFTC chief also dismissed claims that sports prediction markets were simply a new form of casino gambling.
“[They are] different products [with] parallel regimes,” he said.
CFTC: Insider Trading Will Be Punished
Selig has been outspoken on the regulation of prediction markets. Earlier this month, he wrote to the Wall Street Journal to hit back at his critics. Many of these people allege that insider trading is “rampant” on the platforms.
“Claims that our insider trading rules are fuzzier than others are simply untrue,” he wrote. “The CFTC continues to serve as a vigilant regulator of prediction markets.”
Selig warned that efforts to “regulate platforms away” would result in predictions markets “continuing to grow offshore, where there are no rules or guidelines.”
“These markets provide significant benefits to individuals, businesses, and the broader economy,” Selig said. “We will continue to ensure their integrity and growth.”
The CFTC chief was responding to a Wall Street Journal op-ed piece. The article’s author claimed that prediction market contracts are “really old-fashioned betting.”
The author estimated that around 90% of activity on the Kalshi platform is sports-related.
Regulator Clashing With States
The regulator is set to lock horns with states. Lawmakers in many parts of the US continue to press ahead with efforts to ban prediction markets.
Earlier this month, Minnesota lawmakers voted in favor of a bill that bans a swath of prediction market activity, including sports-related contracts.
Several New Mexico tribes have also filed a lawsuit against Kalshi. The tribes claim the predictions market provider is violating Indian gaming law by offering illegal gambling services.
Nevada has previously gone a step further. It won its own legal battle in March this year, forcing Kalshi to temporarily cease its operations in the Silver State.
A Nevada court upheld and extended the ban early last month.
The CFTC has signaled it is ready to move against states that take similar moves. Selig said the regulator would sue states that seek to block prediction markets without its approval.
“Under the Commodity Exchange Act, the CFTC holds exclusive authority over prediction markets,” wrote Selig. “While some may harbor skepticism about innovative financial products, we firmly stand by our jurisdiction and remain committed to protecting it.”
The Long-Term Picture
Late last year, the gaming consultancy Eilers & Krejcik predicted that sports contracts would account for 44% of the volume on prediction markets in the long term.
The consultancy added that markets’ annual trading volumes could reach $1 trillion by the end of 2029.
Earlier this week, the New York Times reported that 80 Polymarket accounts “displayed suspicious betting patterns over the past two years.”
The newspaper wrote that the account holders had won big on “dozens” of longshot bets, earning hundreds of thousands of dollars in cryptocurrency.
