Tensions flare over event contracts at CFTC roundtable in Washington D.C.

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The Backstory

Sports contracts move from fringe idea to regulatory flashpoint

The confrontation at the Commodity Futures Trading Commission’s Washington roundtable did not emerge in isolation. It was the latest sign that event contracts, once treated as a narrow corner of derivatives markets, have become a central policy fight involving Wall Street exchanges, sports betting companies, crypto firms, tribal gaming interests and state regulators.

At the center is a basic question with large commercial consequences: When a contract pays out based on an election, economic report or sporting event, is it a federally regulated financial product or a form of gambling subject to state law? Prediction market operators have argued that CFTC oversight provides a national framework. State officials, tribes and parts of the gaming industry counter that sports-linked contracts can bypass gambling statutes, compacts and licensing requirements.

The stakes have risen because large incumbents are no longer watching from the sidelines. CME Group, already the world’s largest futures exchange by volume, has been preparing products that could put it in direct competition with Kalshi, Polymarket and other prediction markets. Its planned push into sports-linked contracts has sharpened disputes over how the CFTC should police manipulation, market integrity and consumer protections.

CME’s entry changes the competitive math

CME has spent the past year expanding its event-contract business beyond traditional futures. The exchange said its existing event contracts reached 100 million trades between a December launch and mid-February, evidence of substantial retail demand for simplified yes-or-no markets. That success has encouraged broader ambitions.

Bloomberg reported that the Chicago-based exchange plans to launch financial contracts linked to sports events and economic indicators before the end of the year, a move that would directly challenge prediction-market operators. The plan, described in CME’s preparations for sports-linked contracts, includes distribution through futures commission merchants, including one being developed with FanDuel.

The FanDuel relationship is particularly important because it bridges two regulated worlds that have often remained separate: derivatives trading and sports wagering. FanDuel has said it is maintaining an open dialogue with state regulators as legal boundaries evolve. That caution reflects a wider concern that companies may not be able to offer state-regulated gambling and federally regulated event contracts without triggering conflicts.

CME’s license gives it an advantage. As a CFTC-regulated designated contract market, it can self-certify new products, potentially accelerating launches without waiting for explicit preapproval. That differs from newer entrants seeking designation or other regulatory relief. It also helps explain why competitors and regulators are closely watching whether sports contracts are listed as financial instruments rather than bets.

Kalshi and Polymarket pushed the door open

Prediction markets gained momentum after a series of regulatory and court developments weakened earlier assumptions that event contracts tied to public outcomes would remain off limits. Kalshi’s court victory allowing election-related trading gave the sector an important legal foothold. Polymarket, which had operated offshore after previous U.S. enforcement pressure, strengthened its U.S. return by acquiring a CFTC-regulated exchange and later receiving no-action relief.

Those developments changed the industry’s risk calculation. Once prediction markets demonstrated that some contested contracts could survive legal challenge, competitors began exploring whether the same federal structure could apply to sports outcomes. The business logic is clear: Sports betting is popular, but U.S. wagering remains fragmented by state. A federally regulated event-contract model could offer broader reach, subject to CFTC rules rather than a patchwork of gaming approvals.

That potential is also what alarms state and tribal gaming authorities. If sports contracts are deemed financial products, operators could reach customers in places where online sports betting is restricted or illegal. For established sportsbooks, the issue is both defensive and offensive: prediction markets could compete with them, but partnerships with exchanges may also give them access to new products and customer segments.

DraftKings CEO Jason Robins’ call at the CFTC session for participants to avoid attacking one another’s business models underscored how commercially sensitive the debate has become. The market is no longer divided neatly between gambling companies and financial exchanges. The same firms can be rivals, partners and regulatory advocates depending on the product.

State and tribal resistance intensifies

The strongest opposition has come from jurisdictions that view prediction-market sports contracts as an end run around gambling law. In New Mexico, the Mescalero Apache Tribe has urged lawmakers and the state attorney general to crack down on online platforms it says are violating tribal gaming agreements. The tribe’s concerns, outlined in its push for an online sports betting crackdown in New Mexico, center on companies that label sports wagers as commodity futures trading even though online sports betting is illegal in the state.

For tribes, the issue is not only regulatory classification. Tribal gaming compacts often provide a foundation for local employment, public services and revenue-sharing arrangements. If federally regulated platforms can offer sports-related products without tribal participation, tribes argue that compact economics could be undermined.

Arizona has also criticized the CFTC’s handling of prediction platforms, reflecting broader state unease. State gaming agencies have built licensing regimes that include suitability reviews, responsible-gambling obligations, tax systems and enforcement authority. A federal event-contract pathway could reduce their leverage if courts and the CFTC determine that such contracts fall primarily under commodities law.

That tension places the CFTC in an unusually political position. The agency’s traditional mandate focuses on derivatives markets, price discovery, hedging and market integrity. Sports contracts raise different questions about consumer behavior, problem gambling and the social meaning of wagering. The roundtable’s arguments over manipulation were therefore part of a larger dispute over whether the CFTC is equipped, or authorized, to regulate products that resemble bets to much of the public.

New applicants test the CFTC’s boundaries

The pipeline of new entrants has added urgency. RSBIX, working with the U.K.-licensed betting exchange Matchbook, has applied to become a designated contract market for sports event trading. Its bid, described in RSBIX’s application for sports event contracts, is pending before the CFTC.

RSBIX is not a theoretical entrant. Founder Jeff Ifrah is a prominent online gaming lawyer who has represented major sportsbook operators and founded a gambling advocacy group. The company also has history with the issue. In 2020, a prior effort with Eris Exchange to launch NFL futures contracts was withdrawn after opposition from the NFL and the American Gaming Association and CFTC scrutiny.

That earlier withdrawal shows how much the environment has changed. Five years ago, sports futures appeared too controversial for approval. Now, with Kalshi and Polymarket expanding the category and CME preparing its own offerings, applicants have stronger incentives to test the limits again. The CFTC’s response will influence whether the market develops through a few large regulated exchanges or a wider group of specialized platforms.

Manipulation concerns remain central. Sports outcomes can be affected by injuries, officiating, team strategy and insider information. Critics argue that thinly traded or narrowly defined contracts may be vulnerable. Supporters respond that regulated exchanges can monitor trading, impose position limits and provide transparency that illegal offshore betting markets lack.

Selig inherits a market-structure fight

The political backdrop has shifted as well. President Donald Trump nominated Michael Selig, a crypto lawyer and adviser, to lead the CFTC at a time when the agency is expected to play a larger role in digital assets and prediction markets. Selig’s nomination, covered in Trump’s selection of a crypto regulator to chair the CFTC, followed a failed earlier nomination of former CFTC Commissioner and Kalshi Director Brian Quintez.

Selig’s posture matters because the CFTC is being asked to modernize market rules while avoiding the perception that it is creating a federal sports-betting regime. The administration has shown interest in crypto and prediction markets, with Trump expected to meet industry leaders from Coinbase, Ripple, Gemini, Robinhood, Polymarket, Kalshi, CME, Nasdaq and Intercontinental Exchange. That planned gathering, detailed in the White House meeting with crypto and prediction market executives, came before the advisory committee’s formal discussion of regulatory clarity.

The CFTC’s next steps could determine whether event contracts mature as a mainstream asset class or remain trapped in legal uncertainty. More rule amendments and consumer-protection standards, as signaled at the roundtable, may give exchanges clearer boundaries. But any framework that permits sports-linked contracts will likely face continued opposition from states, tribes and gaming interests that see federal preemption as a threat to their authority.

The dispute now pits innovation against jurisdiction, and competition against market safeguards. As CME, Kalshi, Polymarket, FanDuel and new applicants press forward, the CFTC must decide how far its derivatives mandate extends into markets that look increasingly like the future of betting.