The Commodity Futures Trading Commission (CFTC) is probing Crypto.com’s contracts related to the Super Bowl and other sports events to assess their legality.
The CFTC notified the North American Derivatives Exchange, Inc. (Nadex), which does business as Crypto.com, on Jan. 14 that it will initiate a review of the two contracts that were self-certified and filed on Dec. 19, 2024.
The two contracts are cash-settled, binary contracts based on the winners of sports events in a calendar year and on the hometown that hosts a celebration, such as a parade, for the winners. The CFTC determined that the contracts may violate its regulations, as well as the Commodity Exchange Act.
In accordance with CFTC regulations, the commission has requested that Crypto.com suspend any listing and trading of the two contracts during the review period, which lasts 90 days. Depending on the review’s conclusions, Crypto.com could be permanently banned from offering some or all of the events encompassed by the contracts.
The cryptocurrency exchange announced in December that it was launching a sports event trading product that mirrors Derivatives North America, its proprietary event contract platform. In essence, the exchange is allowing its website and app users across the country to trade their own predictions on the outcome of sports events, including Super Bowl LIX.
“Sports event trading offers an entirely new platform for U.S. users to engage nationwide at Crypto.com and in the Crypto.com app,” said Crypto.com co-founder and CEO Kris Marszalek at the time. “This unique financial product allows users to trade their prediction on the outcome of a sports event. It’s a fundamentally new concept for sports, and we’re thrilled to be the first regulated platform in the U.S. to offer it to our users.”
Crypto.com says CFTC action contradicts rulings
In a statement provided to SBC Americas, Crypto.com suggested that the CFTC’s actions contradict not only court rulings but its own past statements. It also sounds like the platform does not plan to suspend trading on sports contracts.
“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,” said a spokesperson. “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.
“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.”
Crypto.com enters sports trading after election frenzy
Crypto.com’s first foray into sports events trading came on the heels of a flurry of high-profile activity around election predictions markets in the fall.
Prediction market Kalshi offers such election event contracts after winning an appeals court case against the CFTC that allowed it to do so. So does Robinhood, and the two companies combined for over $300 million in contracts related to the 2024 election.
However, Kalshi and CFTC will be back in federal court on Friday for oral arguments on exactly how trading on political events should be categorized.
Kalshi has also offered sports events trading for some time and Robinhood has voiced its interest in the sports betting sector.
CFTC Chairman Rostin Behnam has warned about events contracts blurring the line between legitimate and illegitimate products. However, Behnam is stepping down on Jan. 20, Donald Trump’s inauguration day, and will be replaced a Trump appointee. Commenters have suggested the new chairman could be more agreeable to events contracts.
