The CFTC is trying to rein in certain practices at prediction markets, but is this a regulator regulating, or an attempt to clean up the industry before a case reaches SCOTUS?
The Bulletin Board
THE LEDE: The CFTC is trying to set up guardrails for prediction markets.
ALTRUDA ANALYZES: A 2026 first, AC casinos best online counterparts.
NEWS: Prediction Markets will not be part of today’s White House tech meeting.
AROUND the WATERCOOLER: State regulators are under fire.
STRAY THOUGHTS: Don’t play Games on game night, watch Game Night.
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The Lede: Can the CFTC Keep PMs Inside the Guardrails?
In a Stray Thought last week I wrote, “I think we’re entering the put up or shut up phase of the prediction market debate.”
What I meant was: The recent spate of court losses seems to have unnerved Kalshi, which doesn’t seem overly confident arguing its self-certify, self-regulate, the CFTC is the be-all end-all case anymore, and is instead (with some guidance issued by the CFTC) cleaning up its act, at least around the edges.
The seeming coordination between the CFTC and Kalshi is hard to miss.
The CFTC has issued several advisories that seem to be aimed at helping prediction markets paint themselves in the best possible light when they have their date at the Supreme Court:
Per NPR, the CFTC has launched a review of easily manipulable mention markets:
“Federal regulators have launched a review of so-called “mention markets” on prediction market sites, where bettors wager millions of dollars on the word choice of everyone from President Trump to soccer sportscasters, according to two people with direct knowledge of the probe who spoke to NPR on the condition of anonymity because they were not authorized to speak publicly.
In response, Kalshi, the largest prediction market in the US, has removed all mention markets from its betting offerings for sports as the Commodity Futures Trading Commission pursues its inquiry, according to one of the people.”
And as NPR noted, a core CFTC rule is that markets are not “readily susceptible to manipulation”: “There is growing concern among Kalshi’s lawyers and federal regulators that betting on certain kinds of speaking events runs against this principle, since the very nature of some markets attracts possible manipulators.”
More from Dustin Gouker:
The CFTC also issued an advisory about selective or randomized rewards and against promising “risk-free” incentives, unlimited payouts, or promotions that could guarantee profits or offset losses. “DCMs are encouraged to consider whether certain categories of incentive programs incentivize impermissible trading behaviors, render listed contracts more susceptible to manipulation, or contribute to market distortion,” the advisory says.
Per the press release:
“Such deficiencies can impede staff’s ability to evaluate whether DCMs have provided adequate notice of program terms and have sufficiently assessed compliance with core principles and other Commission requirements.”
As Indian Gaming Association Chairman David Bean said during a recent IGA New Normal webinar: “Chairman Selig of the CFTC is coaching this industry to prep them for the Supreme Court. In the history of the United States, when have you seen a regulatory agency advocating for the people that they’re supposed to regulate?”
Or, as Benjamin Schiffrin, Director of Securities Policy for Better Markets, put it:
“This is not the first time the CFTC has directed Kalshi to violate a court order. It did so after a Michigan state court ordered Kalshi to void, cancel, and refund some bets. The CFTC is now directing Kalshi to violate the orders of a federal court. Its cheerleading for prediction markets truly knows no bounds. The harm this causes is no longer limited to the derivatives markets the CFTC is supposed to oversee or the consumers state gambling laws are supposed to protect but now extends to the rule of law that the CFTC disregards itself.”
The appearance of close coordination between the CFTC and prediction markets is even harder to ignore when it comes to the emergency orders it has issued, the first two since 1980! (And regular readers know how sparingly I use exclamation points).
As John Lothian (whose newsletter has been covering the derivatives and securities markets for more than 25 years) recently wrote on the emergency orders:
“The CFTC has exercised that authority six times since its creation: four times between 1976 and 1980 and twice during the past 30 days… The commission allowed its emergency power to remain dormant for 46 years before Chairman Michael Selig revived it twice, both times in support of Kalshi.
“Section 8a(9) is the CFTC’s nuclear option. It allows the commission, upon finding an emergency, to direct a registered exchange to take whatever action the agency considers necessary to maintain or restore orderly trading. The merits of that emergency determination are generally insulated from judicial review.”
And as NPR’s Bobby Allyn put it, it’s hard to wrap your head around the idea that sports betting (and this is largely about preserving sports contracts) requires a nuclear response:
While attorney Daniel Wallach thinks the orders may be strategic:
This will be the topic du jour on today’s Indian Gaming Association New Normal Webinar series (1 PM EST, today) hosted by Jason Giles, Executive Director of the Indian Gaming Association, and Victor Rocha, Conference Chairman of the Indian Gaming Association. Their guest will be Amanda Fisher, Policy Director and COO of Better Markets. Register here.
Altruda Analyzes: AC Casinos Best Online Counterparts in July
The New Jersey Division of Gaming Enforcement reported a record $276.9 million in internet casino revenue for July on Friday, maintaining its year-long streak of double-digit, year-over-year percentage improvements.
The figure edged past May’s previous high of $276.3 million and was 12% higher than the $247.3 million accrued by operators last year. It was the fifth time overall revenue has surpassed $270 million, all coming in the last eight months.
Despite the record haul, Atlantic City brick-and-mortar casinos shined brightest in July with $304.2 million and posted their first “W” of the year over internet casino operators.
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News: Prediction Markets WILL NOT Be Part of WH Meeting
As I reported on Monday (h/t to Politico), the White House is hosting tech leaders today, and while they were originally expected to be in attendance, it appears prediction markets have been disinvited:
Read whatever you will into this.
And as a reminder, prediction markets will be front and center on Thursday:
Around the Watercooler
Social media conversations, rumors, and gossip.
Kalshi is taking aim at state lawmakers and regulators, calling them pawns for the casino industry.
First it was Comms Director Jacki McGavick taking shots at New York Gov. Kathy Hochul:
And now there is this from Kalshi’s General Counsel and Chief Regulatory Officer:
I’ve written extensively about growing tensions between licensed gambling operators and regulators, and this, from West Virginia Rep. Shawn Fluharty, is yet another reason it’s a bad idea, as the industry’s complaints (and high-profile no-show) call into question the credibility of regulatory bodies, which prediction markets are looking to further erode at a time when the licensed industry needs them the most:
Stray Thoughts
It’s been a while since I posted about pop culture, but I recently rewatched Game Night with one of my kids, and forgot how funny it was:
The line, “How can that be profitable for Frito Lay?” Kills me.
