The U.S. Commodity Futures Trading Commission has opened discussions with every major professional sports league about policing prediction markets, Chairman Michael Selig said. The agency has already taken several states to court, arguing that sports contracts are derivatives rather than gambling and should fall under federal regulatory authority.
Why the CFTC sees sports contracts as derivatives
Chairman Selig made the remarks in a recent interview, outlining the agency's legal strategy. The CFTC contends that a sports contract—where a person bets on the outcome of a game or event—functions like a derivative because its value derives from an underlying variable, in this case the result of a sporting event. Under this argument, such contracts would be subject to the Commodity Exchange Act, which gives the CFTC broad authority over derivatives markets. The agency has already filed lawsuits against multiple states that have legalized sports betting, seeking to block state-run prediction markets that it says infringe on federal jurisdiction.
The states in the CFTC's crosshairs
While Selig did not name the specific states, the CFTC has previously taken action against New Jersey, Delaware, and others over sports betting laws. The lawsuits argue that state-sponsored sports betting platforms amount to unregistered derivatives exchanges. The agency's push to classify sports contracts as derivatives would effectively pull prediction markets under federal oversight, limiting the ability of states to regulate them independently.
What the talks with leagues mean
By engaging with the NFL, NBA, MLB, NHL, and MLS, the CFTC is signaling that it wants the leagues to help shape how prediction markets are policed. The discussions are preliminary, but they suggest the agency is preparing a framework that could require leagues to report suspicious trading activity or block certain contracts. The CFTC's move comes as prediction markets—where people bet on everything from election outcomes to game scores—have exploded in popularity, raising concerns about manipulation and consumer protection.
The leagues have not commented publicly on the talks. Any resulting rules could reshape the multibillion-dollar sports betting industry, which currently operates under a patchwork of state laws following the Supreme Court's 2018 decision to strike down the federal ban on sports betting. The CFTC's classification of sports contracts as derivatives would create a single federal standard, potentially overriding state regulations.
For now, the agency is focused on its court battles. A ruling in one of the pending cases could determine how much authority the CFTC has over prediction markets—and whether the leagues will have a seat at the table when the rules are written.
