This Seems Capricious And Arbitrary
The new nominee to chair the Commodity Futures Trading Commission signed his name to a letter for Paradigm in 2024 in support of sports contracts.
The Bulletin Board
THE LEDE: CFTC nominee signed a 2024 letter supporting sports contracts.
ROUNDUP: Tonko seeks support of pro leagues; MLB working on micro-betting ban with operators; IL bill would prohibit credit cards on all forms of gambling.
NEWS: Retail horse racing bettors are increasingly frustrated with CAWs.
BEYOND the HEADLINE: An under-the-radar horse racing case with significant implications.
AROUND THE WATERCOOLER: Coinbase CEO highlights a key issue with prediction markets and fight-fixing accusations.
STRAY THOUGHTS: Not the attention you want.
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The Lede: CFTC Nominee’s 2024 Prediction Market Letter
InGame managed to unearth an interesting legal argument in favor of prediction markets offering sports contracts, which was signed by the current nominee to chair the Commodity Futures Trading Commission (CFTC), Mike Selig, who is the current chief counsel of the Securities and Exchange Commission (SEC) Crypto Task Force.
As InGame reported, Selig is one of three Willkie Farr & Gallagher lawyers whose names appear at the bottom of “a July 2024 letter from venture capital fund Paradigm Operations, arguing that the CFTC should permit Kalshi to offer political event contracts. Paradigm went on to invest in Kalshi in June of this year.”
In the letter, Paradigm states, “The CFTC’s characterization of political contests, awards contests, and sporting events as forms of ‘gaming’ is arbitrary and capricious,” arguing that sporting events are not “gaming,” and therefore not covered by the CFTC regulations concerning markets that may be against the public interest.
To be clear, Selig was one of three lawyers who signed the letter sent by Paradigm and was making the argument on behalf of a client, not expressing a personal opinion. That said, it would appear that the nominee to chair the CFTC is not opposed to sports contracts being on offer at prediction markets.
And for my pop culture aficionados, IFYKYK.
Roundup: Tonko Queries Pro Leagues; MLB Working on Micro-Betting Ban; IL Bill Would Prohibit Credit Cards
Tonko pens letters to sports leagues following betting scandals [Press Release]: “Congressman Paul D. Tonko (NY-20) sent letters to several major professional sports leagues demanding they support implementing federal gambling safety standards included in his SAFE Bet Act. The letters were sent to the commissioners of the NBA, WNBA, NFL, NHL, MLB, MLS, and NWSL. “Claims of prioritizing integrity ring hollow when leagues have sold credibility to gambling operators, integrated betting content into broadcasts, normalized wagering for teenagers, glorified it in advertising, and then failed to prevent criminal conduct from taking hold within the sport,” the letters read. “The choice before you is now explicit. Either engage directly with Congress to establish mandatory federal guardrails that restore integrity and protect the public, or stand in opposition and accept responsibility when the next scandal breaks and more families and lives are destroyed.”
Ohio puts micro-bet ban on hold [SBC Americas]: That may sound like a good news headline, but the reason Ohio Gov. Mike DeWine is shelving his proposed ban on player props is to give MLB and other leagues the opportunity to discuss the matter with licensed sportsbooks: “DeWine said this week that he is pausing in his efforts to instigate a statewide ban on micro-betting because MLB Commissioner Rob Manfred is leading that effort… Per the Columbus Dispatch, Manfred’s office told DeWine that it believes it has an agreement with most sportsbooks to ban such wagers.”
Illinois bill would prohibit credit cards for all gambling [SBC Americas]: “Rep. Curtis Tarver and Rep. Marti Deuter filed HB 4149 that would amend both the Illinois Lottery Law and the Illinois Gambling Act to stipulate that ‘a person shall not use a credit card to participate in a gambling game.’” The prohibition would cover all forms of gambling, including lottery sales and ATM machines at casinos.
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News: Horse Racing CAW Platforms Under Fire
A national law firm, Hagens Berman, has filed a class-action lawsuit in the US District Court for the Eastern District of New York against several key players in the American horse racing industry, including the Stronach Group, Churchill Downs, and the New York Racing Association (NYRA).
“The complaint claims the defendants have been running a pool-rigging enterprise ‘whose purpose it was to conduct an illegal gaming business and to manipulate the betting pools of horse racing tracks throughout the United States in order to allow computer-assisted wagering teams to profit at the expense of plaintiff and the other class members.’”
The suit alleges that the defendants are colluding with computer-assisted wagering (CAW) platforms by allowing CAWs to place high-volume bets seconds before races start, giving them an unfair advantage in pari-mutuel betting systems. According to the lawsuit, the defendants allow CAWs to analyze betting pools, exploit vulnerabilities, and trigger last-second odds drops that reduce payouts for everyday “retail” bettors while benefiting the professionals.
CAWs account for approximately one-third (around $4 billion) of annual US horse race betting.
CAWs have been denounced online, including by Barstool founder Dave Portnoy and friend of the newsletter Mike Mutnansky:
Beyond the Headline: Michigan Vs. Churchill Downs
Churchill Downs and the Michigan Gaming Control Board (MGCB) clashed over regulatory authority for advance-deposit wagering (ADW) horse betting apps during a Sixth Circuit Court of Appeals hearing on October 23.
SBC Americas’ Jessica Welman has been all over this reporting, which is flying well below the radar given its bigger picture implications.
As SBC reports, the case stems from the closure of Michigan’s last racetrack, Northville Downs, in February 2025, prompting the MGCB to deem ADW operations unlawful without local licensing.
CDI sued in January 2025, arguing the federal Interstate Horseracing Act (IHA) preempts state oversight, allowing interstate betting without Michigan’s consent.
A US District Court granted CDI a preliminary injunction in February 2025, allowing TwinSpires to remain operational during the lawsuit.
The MGCB appealed, leading to oral arguments in late October.
This dispute has significant implications (as Jessica Welman noted during her appearance on the Straight to the Point Talking Shop Podcast in July), not only for preemption but also for hub-and-spoke models and concerns about nationwide regulatory erosion if CDI prevails.
Around the Watercooler
Social media conversations, rumors, and gossip.
Coinbase CEO Brian Armstrong trolled the company’s recent earnings call, when he rattled off a bunch of ‘mention markets’ available on prediction market sites during the call:
“I was a little distracted because I was tracking the prediction market about what Coinbase will say on their next earnings call. I just want to add here the words Bitcoin, Ethereum, blockchain, staking, and Web3.”
Some see it as a nod to the absurdity:
Despite the joking nature, not everyone sees the humor in it, considering $84,000 was wagered on the Coinbase mention markets, and CFTC rules are supposed to prohibit markets that are readily susceptible to manipulation:
Third Planet’s Brett Smiley had the best take on this, because at some point, we have to take market manipulation seriously, particularly if they are going to be a major purveyor of sports markets:
InGame’s Jeff Edelstein also penned a column on the differing treatment of licensed sportsbooks and prediction markets: NBA vs Coinbase: The Double Standard of Market Manipulation.
And a second Watercooler today, as the latest UFC fight card has raised some eyebrows — I’ll skip the usual “hold my beer” meme and go straight to Pulp Fiction: “Step aside, Butch NBA.”
So what’s going on? The main issue stems from highly unusual betting line movements in the hour leading up to the Isaac Dulgarian vs. Yadier Del Valle at UFC Apex on November 1.
Dulgarian opened as a -240 to -270 favorite but saw his odds shift to around -150 to -160 just before the fight. Even more suspiciously, the prop bet for a first-round finish (which aligned exactly with the outcome) dropped from +850 to +475, prompting some sportsbooks to pull the line entirely to prevent further wagers.
Stray Thoughts
It’s never good when a major influencer’s video, titled, Exposing the Gambling Epidemic (subtitled “A closer look at the rise of gambling and how it’s infected every part of American culture”) amasses nearly 4 million views in a couple of days.
Coffeezilla has 4.3 million YouTube subscribers.