Crypto.com’s Sports Event Contracts Under Investigation
Crypto.com recently launched contracts allowing users to bet on outcomes of major sports events, including the Super Bowl, catching the attention of regulators.
The CFTC is investigating whether these offerings cross the line into illegal gambling. A major concern is that these contracts are available nationwide, bypassing the state-specific rules that govern traditional sports betting.
Adding to the challenge, Crypto.com doesn’t use official event names in its listings, instead opting for vague descriptions. This lack of transparency has frustrated the CFTC, as it complicates their ability to oversee these markets.
Kalshi’s Political Ties and Court Battles
Kalshi, a prediction market platform, has also come under the spotlight. It allows users to trade on various outcomes, including elections and potentially controversial topics.
In 2024, Kalshi won a court case against the CFTC, securing the right to offer contracts on election outcomes. However, the CFTC has appealed the ruling, citing concerns about election integrity.
Meanwhile, Donald Trump Jr., the son of the newly elected U.S. president, recently joined Kalshi as a strategic advisor. His involvement has raised eyebrows, as it signals a possible shift in how the CFTC might approach regulation under a Trump administration. Trump Jr.’s presence could bolster Kalshi’s influence, making it easier for the platform to navigate regulatory challenges.
Polymarket’s Global Reach and U.S. Restrictions
Polymarket, another major player in prediction markets, claims it blocks U.S. users to avoid regulatory issues. However, the CFTC is skeptical and has sought information from platforms like Coinbase about user interactions with Polymarket.
This scrutiny stems from the platform’s focus on high-profile events, such as major sports championships, which closely resemble traditional sports betting.
The CFTC’s Balancing Act
The rise of sports event contracts presents a tough challenge for the CFTC, which must balance innovation with regulation. The agency’s priorities include:
- Ensuring consumer protection in an unregulated space.
- Addressing the lack of transparency on platforms like Crypto.com.
- Keeping pace with technological advancements like blockchain, which these platforms rely on.
The Bigger Picture: U.S. Regulation of Prediction Markets
Traditional sports betting, regulated in 38 states and Washington, D.C., is dominated by familiar names like FanDuel and DraftKings. In contrast, prediction markets offering contracts on events like elections and sports operate in a gray area, often accessible nationwide.
The CFTC has struggled with these markets before. In 2021, for example, ErisX withdrew a proposal for similar event-based contracts after the commission signaled it would reject the idea. The highlights the difficulty of regulating platforms that push the boundaries of existing laws.
