The rules that the CFTC proposed around sports prediction markets Wednesday, which included a ban of pitch-by-pitch micro markets in baseball but did not touch more popular player prop bets across all sports, stemmed from concerns several leagues raised during meetings with the regulator in recent months.
“That feedback certainly factored in,” CFTC Chairman Michael Selig told SBJ in an interview after the regulator posted the 267-page rules proposal on its web site. “The comments factored in. We talked to folks on the Hill as well. We talked to folks in state elected official positions, federal elected official positions. We all care about the integrity of sports. We all care about ensuring our markets are free of fraud, manipulation, insider trading and the like.”
The proposal laid out includes a “special rule” that will allow the CFTC to deem certain contracts involving war, terrorism, assassination or gaming -- defined as sporting events and player performance -- as “contrary to the public interest” and subject to additional review. It outlines proposed factors that might lead a sports event contract to pass public interest scrutiny.
Though gambling regulators in some states have banned prop betting on college players and tightened rules around bets on pro players, the CFTC proposal allows for both, describing the potential for their manipulation as “detectable.” It proposed bans on contracts on the outcome of individual pitches, shots and plays.
“We believe these markets are going to exist, whether it’s in the United States or elsewhere,” Selig said. “So if we’re going to have them here in the United States, we want to set clear rules of the road to protect investors, to protect consumers and to make sure that the United States sets the gold standard for prediction markets.”
The CFTC has entered memorandums of understanding to work with MLB and the NHL on regulation and policing of the contracts, which have emerged as a popular sports betting workaround in states that haven’t legalized. It continues to work toward similar agreements with other leagues, Selig said.
