CFTC Halts Novig, ProphetX Sports Prediction Market Contracts

The Commodity Futures Trading Commission has paused contracts at Novig tied to the first points scored in a basketball game and at ProphetX tied to Scorigami contracts. Scorigami is a term used for a score that has never happened before in the sport. 

These are also called micro contracts. 

Contracts like those at Novig, which bet on who will score the first points, can be somewhat predetermined, and the NBA wants those markets shut down to avoid issues like integrity concerns or fans harassing athletes.

The news was first reported by Front Office Sports, and as the outlet says, the CFTC "demanded" they not put out these contracts, which were self-certified, and also asked both companies to explain how and why they comply with their federal law. 

“It’s kind of a warning shot” to prediction markets, a source said to FOS. 

CFTC Challenges Self-Certification of Sports Micro Contracts

The CFTC said the two companies made "false self-certifications," meaning the contracts aren't allowed under the Commodity Exchange Act. 

Novig and ProphetX can offer up contracts, or self-certify them, but the CFTC can intervene. 

“Any derivatives contract offered by a CFTC-regulated exchange must be compliant with the Commodity Exchange Act,” the CFTC said in a statement. “The CFTC’s rejection of ‘micro trades’ today reflect a broader commitment from Chairman [Michael] Selig and the CFTC to protect consumers from potential fraud or manipulation. We will continue working with our registrants to ensure prediction markets offer the valuable information that they have for decades.”

According to FOS, a ProphetX spokesperson confirmed it was reached out to by the CFTC and said they “requested that we voluntarily defer listing the Scorigami contracts pending further review, not that we withdraw them.

“We complied with that request and have since provided additional analysis supporting the contracts’ regulatory compliance and economic utility,” ProphetX added. “We remain constructively engaged with staff.”

Novig didn't respond to FOS's request for comment, and the CFTC didn't confirm whether this is the first time it has demanded markets be taken down. 

CFTC Scrutiny Could Extend to Other Prediction Market Platforms

FOS says sources told them these letters are part of a “broader cleanup” by Selig. FOS also noted that they had a report last month about the CFTC sending letters to companies like Kalshi, Polymarket, Rothera, and Novig about their incentive programs to ensure the promotions weren't misleading. 

Of course, this comes as prediction market platforms face heavy legal scrutiny, with New Jersey even petitioning the Supreme Court for a ruling. This also comes after the NBA had its partners, FanDuel and DraftKings, stop offering parlays that let you combine multiple "unders" on player props, individual players, the opening tip result, and more. 

Another source told FOS that companies like DraftKings and FanDuel, which also have prediction market platforms, risk similar letters from the CFTC if they offer them. 

It's unclear what happens if ProphetX and Novig don't