The Tennessee Sports Wagering Council (SWAC) has contacted the Commodity Futures Trading Commission (CFTC), urging them to stop sports event trading.
SWAC Director Mary Beth Thomas sent a letter to CFTC Acting Chair Caoline Pham. The letter argues that the prediction markets seen on sites like Crypto.com, Kalshi, and Robinhood are sports betting. These markets should then be under the jurisdiction of SWAC and liable to state taxes.
The letter that was shared on social media stated, “In Tennessee, it is a taxable privilege to offer sports wagering pursuant to a licence issued in accordance with the Tennessee Sports Gaming Act.”
It went on to add, “We believe that these sports event contracts are Wagers under the Act and are being offered in violation of Tennessee law and regulations. The sports event contracts give consumers the option to purchase contracts corresponding to one of two outcomes of an event. In a sporting event context, a consumer is purchasing a contract that reflects which team they believe will win or lose the matchup. The ultimate result is money being won or lost based on the outcome of a game.”
The CFTC will hold a roundtable on April 30th, and SWAC wants their views to be part of the discussion.
History of sports event trading
Intrade was perhaps the first company to offer prediction markets in sports. The company started in Ireland in 1999 and was initially famous for its political markets. This success led to markets created for sporting events such as the World Cup, Super Bowl, and NBA. They closed down in 2012, but others have followed their model of allowing users to trade predictions.
Betfair, based in the UK, started in the 2000s and became one of the world’s leading exchange sites. The site is not allowed in the US, although its subsidiary FanDuel is one of the most popular licensed sportsbooks.
In the US, the reversal of the ban on gambling has seen the rise of sports event trading as well. Crypto sites have also moved in on prediction markets. Crypto-based Polymarket launched in 2020 and bills itself as “the world’s largest prediction market”. Although its headquarters are in New York, it officially does not accept US users. It has a host of markets on sports, including NFL, NBA, and MLB.
The CFTC fined the company $1.4 million in 2022 over regulatory violations, and the FBI raided founder Shayne Coplan’s home last year over suspicions that the site was allowing US users to gamble on the presidential election.
Ball in CFTC’s court
Kalshi, who are licensed by the CFTC, are the main target of Tennessee regulators. They first offered sports event trading in 2021 and have been expanding their offerings. This week, they began to offer markets on the winner of NBA matches.
States have become increasingly frustrated with the spread of prediction markets. Six states issued cease-and-desist letters to Kalshi, as well as Crypto.com, and Robinhood. But, so far, regulators have failed to secure any victories in court against the companies.
Kalshi CEO Tarek Mansour has previously stated, “The CFTC is our regulator. If the CFTC tells us to stop, we will absolutely stop. If they don’t, then we won’t.”
The ball is now in the CFTC’s court and much focus will be on the outcome of their discussion later this month.
Explore more articles like this
Subscribe to the Markets Outlook newsletter
Get critical insights to spot investment opportunities, mitigate risks, and refine your trading strategies. Delivered every Monday
Cointelegraph is a free to read website, by purchasing a product through affiliate links in our content, we may earn a commission at no extra cost for our readers. Which will allow us to finance our operations and continue with our research work for our readers. We ensure all recommendations go through in-depth editorial checks to maintain accuracy and quality. You can learn more about this on Content Guidelines and How We Rate pages.
