A federal regulator is pushing back against a recent effort by Crypto.com to get into a sports betting-like business.
The U.S. Commodity Futures Trading Commission (CFTC) announced on Tuesday it will start a review of two sports event contracts that Crypto.com self-certified and submitted to the regulator on Dec. 19.
The contracts at issue are based on the winner of a league’s championship, such as the Super Bowl, and the hometown that will host a celebration, such as a parade, for the winners of that kind of event.
Prediction market pushback: the CFTC says it will review two sports event contracts that Crypto self-certified (such as its Super Bowl one) after determining they may involve prohibited activity (probably "gaming"). CFTC has requested Crypto suspend trading during the review. pic.twitter.com/TU1Gqpt4fT
— Geoff Zochodne (@GeoffZochodne) January 14, 2025
Crypto revealed its sports event trading business just before Christmas, calling them a “CFTC-regulated derivatives product” and declaring that “predicting the outcome of The Big Game just got a lot more interesting.”
The announcement came as something of a surprise. For online sportsbooks, it also meant they could face fresh competition from Crypto.com and others, such as Robinhood, another CFTC-regulated entity interested in sports betting.
Hold up, wait a minute
However, according to a press release, the CFTC has determined the contracts may involve an activity prohibited under its rules, such as terrorism, assassination, war, gaming, or other unlawful activity. The regulator has asked Crypto to suspend any listing and trading of its two sports contracts during the 90-day review period.
“It is disappointing that the current and imminently departing CFTC leadership would take this action while not allowing the incoming CFTC leadership to determine how free markets operate under its administration,” a Crypto.com spokesperson said in a statement to Covers. “The majority’s decision to apply this rule contradicts recent Federal Court rulings and conflicts with the current Commission’s own statement set forth in its recent rule proposal.”
Crypto does not sound like it plans to suspend trading immediately, either.
“We remain committed to working with the CFTC and will continue to support our customers and the trading of our sports title event contracts in all 50 states without interruption while we review the CFTC’s notification,” the spokesperson said.
The watchdog barks
Nevertheless, the CFTC’s review suggests that the regulator — even with its chairman about to depart, and the incoming president’s son now advising a prediction market operator — will not rubber-stamp every event contract.
The regulator also took issue with contracts offered by Kalshi involving the alleged killer of the UnitedHealth CEO. Those offerings were pulled before a review was initiated.
Still, wagering via prediction markets such as Kalshi and, now, Crypto, blew up around the 2024 presidential election and has continued to grow following Kalshi’s success in the courts.
The event contracts are federally regulated, making them available across the U.S., rather than on a state-by-state basis like online sportsbooks such as DraftKings and FanDuel.
Like Crypto, Kalshi self-certified congressional control contracts in 2023, but they were challenged shortly after by the CFTC and a review was begun that led to their prohibition. It wasn’t until a court ruled in Kalshi’s favor last year that the prediction market allowed election-related trading to resume.
While that case is technically ongoing (arguments will take place later this week), it has provided enough legal cover for Kalshi and others to offer an ever-expanding assortment of event contracts that users buy and sell, including those tied to sports and U.S. election odds.
Kalshi is now offering de facto wagering on a variety of things, including the next head coach of the Dallas Cowboys and the expected guests at Donald Trump’s inauguration on Jan. 20.
Current CFTC chairman Rostin Behnam will step down from the job the same day Trump returns to the White House, which could signal a shift in approach toward prediction market operators.
“What matters is the proposition that when derivatives trading occurs on an organized exchange subject to strictly enforced rules and oversight, and within a system of effective self-regulation, there should be no mistaking the experience for gaming, gambling, or anything less than the bustling throws of commerce,” Behnam said last week.
