CFTC Discusses Prediction Market Oversight at NEXTPredict

Last Thursday, the NEXTPredict conference was held, and oversight of prediction markets was a hot topic. At the conference, regulators and industry executives discussed a range of topics, including integrity, parlays, and enforcement. 

Prediction markets face constant legal scrutiny, but they had a big win when the NBA partnered with Polymarket, Kalshi, and DraftKings Predictions earlier this week. 

CFTC Seeks Greater Oversight of Offshore Prediction Markets

At the conference, the Commodity Futures Trading Commission's Director of Enforcement, David Miller, said the commission wants large offshore prediction market outlets to register so it can monitor their activity. For example, the international version of Polymarket (not Polymarket US) had a market related to an alleged rape case involving Cornell University. 

“We want to make sure that the FTXs don’t happen again,” Miller said, referring to the failed crypto exchange. 

The conversation also touched on insider trading laws, specifically a scenario in which Venezuelan President Nicolas Maduro could trade on his own capture. Miller said that may not violate federal insider trading laws, but it would violate the exchange's rules. 

This example came up as a U.S. Special Forces soldier was accused of using information he had access to make about $400,000 on Polymarket. We've seen other examples, such as a teleprompter operator for Donald Trump looking to make money off Mentions markets. 

Prediction Market Parlays and Sports Integrity Draw Attention

Also discussed were prediction market parlays, also known as combo trades. At the time of the conference, White Swan Predicts CEO Bernard Marantelli said prediction market platforms carried about $18 billion in risk exposure over the seven days ending the Tuesday before the conference. He added that it grew about 20% through the first five weeks of the NFL season. 

Additionally, Robinhood Vice President JB Mackenzie said his company has spoken with professional leagues about integrity and has taken markets down that the NFL and NBA asked operators to avoid. 

That comes as the NFL sent in a note to the Supreme Court on behalf of New Jersey in their fight against Kalshi. 

DraftKings CEO Jason Robins also discussed the company's relationship with the NFL, saying the league may be more comfortable with the safeguards DraftKings has in place than with competitors. 

“I do think that we built the collaborative relationship where they feel more comfortable that we’re taking the safeguard measures that are necessary and maybe don’t feel as much that way as some of the other participants in the market,” Robins said.