CFTC Sends Advisory Notice Over Sports Prediction Markets

Commodity Futures Trading Commission Chairman Michael Selig is delivering on his promise to regulate sports prediction markets.

The regulator issued an advisory notice to all designated contract markets (DCM) that operate the controversial markets on Thursday. In it, operators were reminded of Core Principle 3, which prohibits them from offering markets that are susceptible to manipulation. No details on which markets would fall into this category were provided.

While the CFTC’s notice shows intent to tighten regulations for DCMs, it leaves more questions than answers. One of the biggest is whether player prop bets would qualify as being easy to manipulate. 

While the regulator could help provide more clarity in the future, the notice suggests DCMs will be responsible for making the decision.

“The division believes that, as front-line regulators, DCMs should take proactive steps to ensure their markets continue to evolve in a manner that complies with the CEA and Commission regulations,” a press release from the CFTC reads.

In addition to the notice, it also confirmed that a 45-day comment period on potential regulation will open once the document is submitted to the Federal Register. 

Selig’s Comments Raise More Questions

In addition to sending the advisory notice, Michael Selig also appeared on CNBC’s “Squawk Box,” which raised significant questions.

The CFTC head struggled when pushed on what qualifies as “insider trading.” While he refused to share any firm definition, he said a “duty of confidentiality” would be a crucial factor. While he could provide more clarity in the future, he also indicated the CFTC wouldn’t necessarily make the decision. 

In the notice and during his TV appearance, Selig made it clear that he expects DCMs to regulate themselves largely. That includes certifying markets and placing the onus on operators to ensure their markets are fair and comply with federal regulations. 

However, he stopped short of promising CFTC action against DCMs offering controversial or easy-to-manipulate products. When asked whether he would seek to make examples of operators who commit egregious violations, Selig was only willing to reiterate his trust in DCMs as the first line of regulatory defense.