CFTC Expands Legal Fight Over Sports Prediction Markets

The Commodity Futures Trading Commission isn’t backing off its support for sports prediction markets.

The federal regulator has filed lawsuits against New York and Wisconsin over their treatment of prediction markets. It argues that the lawsuits the states have filed against operators are intentionally ignoring federal law to hinder their thriving businesses. As in other states, the CFTC accused greedy state lawmakers of seeking to protect their tax revenue while limiting their residents' freedom.

The CFTC’s lawsuits are expected to protect industry operators in the immediate future and prevent further lawsuits from being filed. 

The regulator had already filed similar lawsuits against Arizona, Connecticut, and Illinois.

Selig: New York lawmakers “overzealous”

Unlike previous administrations, Michael Selig’s CFTC has used aggressive rhetoric against states trying to fight the prediction industry. Though New York is a far larger opponent, his statement on the lawsuit used the same aggressive language.

CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges. As I’ve said before, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.

Wisconsin looks to protect its new mobile market

Two weeks ago, Wisconsin Governor Tony Evers signed off on a bill to legalize mobile sports betting. It used the same hub-and-spoke model, which the state’s gaming tribes will operate. The market is expected to launch in the fall, during the bust football season.

The state legalized retail betting in 2021, but lawmakers were unable to find an agreement to add a mobile market for years. One major reason the deadlock ended was the emergence of sports prediction markets, which offered residents a way to wager on sports. 

The acknowledgment of that fact by both parties also led to the lawsuits filed against prediction operators, starting this fight with the CFTC.

Selig’s words could come back to haunt him

The CFTC Chairman didn’t offer much comment after the lawsuit against Wisconsin was filed, but one line he used is turning some heads.

Our message to Wisconsin is the same as to New York, Arizona, and others: if you interfere with the operation of federal law in regulating financial markets, we will sue you.

We aren’t naive enough to believe Selig cares how Democrat-led states will respond to that quote, but it's a bold statement to those run by Republicans. 

Several conservative states have religious and moral objections to gambling, leading them to keep sports betting either illegal or severely restricted. They have expressed opposition to prediction markets, and won’t like the tone of Selig’s ultimatum.

The quote also ignores the fact that American voters will ultimately bear the cost if the CFTC wins its lawsuits. With the prediction industry already threatening the critical tax revenue generated from sports betting, states that resist could be facing serious long-term financial consequences from the fight.