The prediction markets landscape is not solely dominated by lawsuits, but recent developments highlight significant legal battles. In the past week:
– Novig and Crypto.com initiated lawsuits against Missouri.
– Polymarket sued Ohio for what it alleges are unconstitutional sports betting regulations.
– Utah filed suit against Kalshi, its affiliates, and two Susquehanna trading firms.
– Michigan's attorney general asserted that Kalshi breached a preliminary injunction by promoting its services in the state.
Yet there’s activity beyond the courts. Here’s a summary of notable events from the last week.
The Commodity Futures Trading Commission (CFTC) urged Novig and ProphetX to delay listing certain sports prediction markets following the release of a proposed rule on sports event contracts. A CFTC spokesperson expressed concerns that the two registered exchanges might offer “micro” event contracts that could violate the Commodity Exchange Act (CEA), such as contracts covering which player will score first in a basketball game. Although the companies self-certified these markets, they have not yet listed them, leading the CFTC to inquire how they comply with the CEA’s definition of a “swap.” According to the CFTC, any derivatives contract from a regulated exchange must adhere to CEA guidelines, emphasizing the commission's commitment to consumer protection against fraud and manipulation.
The CFTC’s proposed regulations suggest that some in-game prop bets might not serve the public interest or fulfill CEA criteria, due to integrity and manipulation concerns. These issues have also arisen within state-regulated sports betting; in fact, the NBA has recently restricted the type of player props and micro bets allowed by its sportsbook partners.
In Ohio, the recent legal push included warnings from the Ohio Casino Control Commission (OCCC) to gaming licensees. Following Polymarket's lawsuit, the OCCC previously issued cease-and-desist directives, sued other companies, and announced plans to fine Kalshi $5 million for alleged unlicensed sports betting activities. This week, the OCCC intensified its stance, informing all sports wagering and fantasy contest licensees that any facilitation of sports event contracts would jeopardize their licenses. The warning extended to also cover service providers like market makers and integrity monitors.
"Affiliation with unauthorized operators raises significant suitability concerns," the OCCC stated. It emphasized the obligation of licensees to maintain their suitability and gave them until October 30 to halt any illegal activities.
Meanwhile, IG Group, following its $1.3 billion acquisition of Underdog, plans to introduce a UK prediction markets product by year’s end. At a recent event, IG Group executives highlighted a perceived strong demand for prediction markets in the UK, aiming to merge predictions, cryptocurrency, and traditional trading into a comprehensive in-house platform. The company filed for a betting license with the UK Gambling Commission, indicating a commitment to regulatory compliance.
In Canada, regulators took a firmer stance against sports prediction markets. The Canadian Investment Regulatory Organization (CIRO) recently revised its terms to ban the offering or promotion of sports and entertainment contracts for investment dealers. CIRO oversees such trading activities and has only authorized Interactive Brokers Canada and Wealthsimple, the latter of which recently formed a partnership with Kalshi. Under the new rules, CIRO prohibits the promotion of any short-term contracts, aligning its approach with provinces’ rights to regulate sports betting.
On the integrity front, Novig partnered with Integrity Compliance 360 (IC360) to enhance accountability within its platform. IC360, a licensed independent integrity monitor, will aid Novig in tracking betting activities and promoting responsible betting practices. The partnership aims to strengthen standards across the prediction markets ecosystem, with Novig indicating its commitment to users by instituting a minimum age requirement.
Lastly, High Roller Technologies announced the official launch of its ROLR prediction markets platform, following an initial beta test. The company is pivoting from its online casino operations to focus on event contracts. ROLR is now registered as an introducing broker with the National Futures Association and is set to offer event contracts across various categories, including sports. High Roller’s entry illustrates the ongoing expansion within the event contracts sector, exemplified by Hacksaw Gaming’s introduction of a B2B prediction markets platform last week.
Overall, while legal challenges continue to shape the prediction markets landscape, significant business developments and regulatory actions are also unfolding.
