I'm Not Even Supposed To Be Here Today
Former CFTC commissioners are not on board with CFTC oversight of sports contracts on prediction markets.
The Bulletin Board
THE LEDE: Former CFTC commissioners are not fans of prediction markets.
NEWS: New Hampshire is a full-fledged casino state.
VIEWS: Lessons from the Poker Boom (Part 4 from Philip Atkinson).
AROUND the WATERCOOLER: Everyone is a prediction market now.
STRAY THOUGHTS: Randal was the 90s Marcus Aurelius.
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The Lede: Ex-CFTC Commissioners Refuse to Drink the Prediction Market Kool-Aid
Two former commissioners at the Commodity Futures Trading Commission (CFTC) are not fans of the current state of affairs.
During a recent appearance on CoinDesk’s Policy Protocol Podcast, former CFTC commissioner Dan Berkovitz doubted sports would pass muster under the Commodity Exchange Act’s “economic purpose” test. Berkovitz was a Trump nominee during his first term and served from 2018 to 2021 before taking a job as SEC general counsel.
“The commodity markets are not for entertainment; they’re not to foster sports betting if there’s no economic purpose,” Berkovitz said. “They’re really for fundamental things that matter to the economy.”
And then there is Gary Gensler, a former CFTC (2009–2014) and SEC (2021–2025) Chairman, who wrote an amicus brief in Kalshi v. Ohio (Sixth Circuit) arguing that sports event contracts on prediction markets are not swaps under the Dodd-Frank Act and that the CFTC does not have exclusive federal authority that preempts state gambling laws.
Here is some of what Gensler wrote in his brief:
“Such contracts do not fit the CEA’s purpose or the statutory language defining swap, which focus on hedging economic risk. Sports bets are very rarely, if ever, about hedging.”
“To put the argument in the plainest real-world terms: Senate Majority Leader Harry Reid of Nevada would never have consented to or passively accepted legislation displacing an activity so critical to his state’s economy and politics by permitting sports betting only under CFTC auspices.”
“There was no mention of sports betting during Amicus’s fifty-four times testifying before Congress as CFTC Chairman, nor did anyone involved in drafting Dodd-Frank speak of making the CFTC a national sports-betting regulator.”
“If Kalshi were correct that sports bets were swaps, then all off-exchange retail sports bets since October 2012—in every state—have been illegal because under 7 U.S.C. § 2(e), non-ECP swaps must be traded on exchanges.”
Like Straight to the Point has long argued, and continues to point out, Gensler also questioned the CFTC’s capabilities to oversee sports betting.
“Congress did not displace historical state police powers over sports betting through Dodd-Frank and give it to a small federal regulatory agency with no expertise in gaming regulation.”
“The CFTC, and Amicus as Chairman, did not think at the time it had become—nor did it seek appropriations to be—the nation’s sports-betting regulator.”
In May, former CFTC commissioner Kristen Johnson also expressed concerns about the agencies oversight capabilities.
Gensler will be a guest on the Indian Gaming Association’s New Normal Webinar series today at 1 PM EST: The New Normal: Gary Gensler on Dodd-Frank, Prediction Markets, and the Powers Congress Never Granted [Register Here].
“This week on The New Normal, we are honored to welcome former SEC Chairman and former CFTC Chairman Gary Gensler. In a recent amicus brief, Gensler challenged the legal foundation underlying the CFTC's support for prediction markets, arguing that Congress never intended Dodd-Frank to transform the agency into a nationwide gambling regulator.”
Quick Hitter: New Hampshire Is Now a Casino State
Straight to the Point has been paying close attention to land-based gambling in New Hampshire, as the state has transformed its hole-in-the-wall charity casinos into what looks like full-fledged resorts.
As I previously wrote, “Here’s what New Hampshire’s charity casinos… are turning into”:
The 130,000-square-foot Nash, which took over a vacant space at the Pheasant Lane Mall, recently announced plans to redevelop the 19,000-square-foot casino in the Mall at Rockingham Park into the 160,000-square-foot Rockingham Grand Casino.
The Lupoli Companies’ Hampton Beach development will include a 52,000-square-foot charitable gaming casino and boutique hotel.
Seabrook’s The Brook casino has added a 300-seat events venue to the existing 90,000-square-foot charitable casino.
Manchester’s Revo Casino and Social House recently received zoning approval for an expanded 73,000-square-foot charitable gaming facility, including two restaurants and a function room near The Mall of New Hampshire.
And as Boston.com recently noted:
“The Nash is now the largest “charitable gaming” facility in New Hampshire, with 130,000 square feet of gaming, dining, and entertainment space inside a former Sears building at the Pheasant Lane Mall… Its rise reflects decades of gradual changes to New Hampshire’s gambling laws. What was once a patchwork of mom-and-pop charity halls has slowly transformed into a booming industry of corporate-backed gaming venues.”
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Views: Lessons From the Poker Boom
This is Part 4 of a four-part series by Philip Atkinson, the CEO of Unrational Games. The articles were originally published on X and are reprinted here with permission from the author.
Part 1: Not Neutral
Part 2: Not For Me
Part 3: Cheaters Everywhere
The articles focus on why poker was destined to fail as a real-money online game, but yet again, there are many parallels to prediction markets.
The Legendary Poker Boom
Less a boom, more a mirage.
Speak to anyone who played in the mid-2000s and there is a good chance they go a little misty-eyed about the boom years. They invariably have a theory for how we get back to them. Sometimes it is a change in the law somewhere, especially in a market like the US. Sometimes it is a new crossover star minted from the latest poker character (Moneymaker was a gift to the industry, but often only a poker player could see stardom in another poker player). Sometimes it is a novel game format, because they are bored of Hold’em, or a rule tightened or loosened, usually to their own benefit. None of it is sufficient. Those days are not coming back, and they were never quite what those people remember.
Poker is old. Extremely old. Hold’em in its modern form has been around for over half a century, and the game’s roots run a great deal deeper than that. Longevity like that tells you something about the fundamentals. It’s easy to pick up yet effectively bottomless. Maths and strategy, logic and emotion, deception and discipline. It is an almost peerless game. By the early 2000s you had whole generations who had been exposed to the game in one form or another, who were now seeing it on television and increasingly had reliable internet at home. The laws governing online play were, at the time, either grey or written for an age when you could only gamble on a riverboat. What looked like a boom was really just this reservoir of latent players finding an outlet. For a few years that supply of customers was so deep that the product sitting on top of it barely mattered.
Open it once
The successful operators learned very quickly how to tap it. I described that PokerStars machine at a high level in Not neutral. When Stars were planning entry to a new market the playbook was extremely professional and organised. Find an ambassador who would resonate with the audience (often a sporting celebrity, occasionally one whose actual grasp of poker was, let’s say, rather tenuous), pay them handsomely to be the face of it, agree whatever land-based casino partnership the local law demanded, corner the television relationships so your branded content ran late at night, then line the product and the marketing up behind the launch. Everyone knew their part, and the company was exceptional at repeating the process, again and again.
But you can only open a market once. You drain that reservoir of existing, poker-aware people a single time, and after that you are in the much slower, much more expensive business of capturing, or creating, the new generation. That is the moment a market starts to mature. It is also, not coincidentally, the moment the player ecosystem begins to evolve - the online-native edges get found, the third-party tools I wrote about start to push the skill level up, and the gap between the committed and the casual begins to widen.
The trouble with a tailwind that strong, and a company effectively derived from that group of players, is that it never forces you to think. Mark and Isai deserve enormous credit for the professionalism they drove when dominating the market - but it did have quite a homogeneity of outlook. It was a poker company run by poker people - and as Mark once put it to me, ‘everyone is replaceable’. In the context of where Stars was, he was largely right. When the current is carrying you, the voices suggesting contrarian positions tend not to be heard. The boat is moving and you have the tide behind you, so you row faster. The hard introspection about the product, the medium-term trade-offs or who the thing was actually being built for, never got tackled. The success of the model meant that the structures and conventions Stars built became the orthodoxy of the entire industry.
Two markets
You could summarise this entire series on the decline of online poker in a single arc. A handful of operators tapped a once-in-a-lifetime pool of players, built the product and the rules for the people who looked like the people building them, then a combination of business need and instinct tilted everything toward the most sophisticated and highest-spending among them. A decade later the product had stagnated, the skill level was beyond the casual player and there was a vast, vocal wall of disillusioned former players. I don’t think many who worked in the industry would argue with the broad thrust of that, but there is a more accurate reading sitting underneath it.
I believe that there are really two poker markets, and there always were. People who play primarily for enjoyment or camaraderie, and people who play primarily for outcome. The line is not quite ‘for money or not’ - plenty of people play for money and are really there for the fun of it - but the two groups want fundamentally different things, and they should mostly not be at the same table. During the boom there were enough easy games to hide that and the system (sort of) functioned. There were so many new players arriving that the two could share a (virtual) felt and everyone got something out of it. As markets matured that no longer held, and you were left with a product built for outcome players, and an ecosystem increasingly dominated by them.
This leads somewhere the industry would, or more accurately could, not go. Real-money poker, the version that built PokerStars into a giant of online gaming, is structurally a niche product. A brilliant, deep, endlessly refined product, but a niche one, for a relatively small group who, on the whole, would rather not have to play each other (even though they are increasingly being made to anyway). The real-money game should never have been the mass market product.
A game, not a job
In a sense, this is not just a theory. The market did effectively split in two, but not in a way that was optimal for the gaming operators. The enjoyment players drifted to free, “social” products - Zynga Poker and others like it. The likes of PokerStars, comfortable in the success of their approach, entirely missed the opportunity of Facebook as a customer platform, and when they were shut out of markets like the US, Zynga had the playing field mostly to itself. Interestingly, despite the freedom they had, those products stayed fairly close to a traditional poker product in style and format. Zynga Poker customers sit inside a walled play-money product, aggressively monetised by in-app purchase offers, while the gaming operators spend money on Meta ads to target them. From a gaming operator perspective, it’s a curious standoff. They are paying to target the very same players, as they are often the multi-vertical customers they want, but ideally they would bring them into their ecosystem, rather than buy them out of Zynga’s. The real money poker sites did try this (PokerStars could even have bought Zynga in the early days), but they pretty much failed in every attempt to occupy the social space, and the rest of the industry can’t conceive of a solution either.
Throughout this series I’ve drawn parallels with prediction markets, and the same trend is visible there today. They are draining their own reservoir as we speak. Players from states with no legalised gaming. Eighteen and nineteen year old students who can now ‘trade’ on their favourite team, or just incinerate their disposable income on five-minute BTC price markets. Those companies will be tempted to read it the way poker did, as proof of how good they are rather than a one-time flood, and to keep building for their important customers - the sophisticated trader, the corporate counterparty quite happy to be fed a customer dreaming of their ten leg parlay. It’s the same process, and it will likely end in the same place.
Talk to most people in the gaming world and, whether they agree with my analysis or not, they will probably tell you that poker (the product) is too much hassle. Too difficult to operate. Not valuable enough. Many of the new mid-market operators in the UK, like Dabble and Midnite, have nothing at all in the space, and for giants like Bet365 it was always an afterthought. What remains of PokerStars has somewhat taken the Betfair mantle of ‘area of Flutter you least want to be in charge of for career prospects’ now that exchanges are cool again. Their views are understandable because their frame of reference is a real money product. Once you think of the market as two separate things, and you realise that poker players like sports (and betting on them) and casino games, you ask questions like “why wouldn’t we want to attract these customers?” I think they should. And I think poker should be fun. So we built @unpoker_rivals.
Around the Watercooler
Social media conversations, rumors, and gossip.
The prediction market space is getting really crowded, with 27 approved Designated Contract Markets (DCM), and another 20 pending — Here is the full list of companies that have applied for a DCM with the CFTC.
As reported by InGame, you can add two more to the list: “Two more businesses in fantasy sports and sweepstakes-based sports betting plan on getting into prediction markets, with Rebet and Realtime Fantasy Sports among the latest companies to apply for registration with the National Futures Association (NFA).”
And of course there is also the Meta news, with the New York Times reporting that the company is in the early stages of creating a prediction market app. Where it differs (and of course it does, because it’s Meta) is it will use a points-based/video-game system rather than real money, at least initially.
More from Dustin Gouker on Meta’s potential entry into prediction markets:
Stray Thoughts
One of my favorite movies is Clerks, and while it’s meant to be a comedy, there is also a great speech by Randal that contains a valuable life lesson — and no, not the one about independent contractors on the Death Star.
In the scene (toward the end of the film) Randal delivers a reality check about how seriously Dante takes his convenience store job. He points out that he acts like the whole place would fall apart without him, when in reality they’re both just doing simple, easily replaceable work — and they’re not even great at it. Meanwhile, the customers they look down on are treated as if they’re beneath them.
The takeaway: Most of us have main character syndrome. No matter how important we think we are, when it comes to our jobs, we’re usually far more expendable than we’d like to admit. Which might explain why AI feels so unsettling to many people right now. It makes that reality harder to ignore.
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