Don’t Bet on Casino-Style Slots and Table Games Coming to Prediction Markets

Prediction markets allow traders to buy and sell shares tied to outcomes across a wide range of subjects, from tonight’s Thursday Night Football game to what journalist Kaitlan Collins may or may not say on her CNN program. With critics warning that these financial platforms could venture into casino-like products, the Commodity Futures Trading Commission (CFTC) has submitted for review two rules aimed at keeping slots and table games off the platforms while affirming their right to offer sports-related event contracts. CFTC headquarters in Washington, DC. The regulator is recommending two new rules for prediction markets. (Image: Getty) The CFTC recently submitted two proposals to the White House’s Office of Information and Regulatory Affairs (OIRA). The first is a proposed “interim final rule” titled, “Further definition of ‘swap’ to exclude casino-style gambling products.” Labeling the suggested regulation as “interim final” would allow the rule to become effective immediately. The scarcely used path requires a federal agency to show good cause in arguing that the rule is urgently needed. The proposed rule is thought to prohibit casino-style games like digital slots and interactive table games from prediction markets regulated by the CFTC. CFTC Distances From Casino Games CFTC opponents argue that if the agency thinks sports are viable financial trading instruments, what’s stopping prediction markets from moving to include other markets that come with high elements of chance. If a trader can invest in who will score the first touchdown tonight during the Steelers and Browns game, couldn’t a prediction market also ask traders if they think the next spin of the roulette wheel will be red or black, or the next hand of blackjack dealt will be 18 or higher? The CFTC’s rule proposal hints that the federal agency wants to assure its opponents that casino gambling isn’t the direction it’s seeking for prediction markets. The official text of the proposed rule has only been submitted to the OIRA and not yet been made public. Prominent gaming attorney Daniel Wallach explained that the OIRA is a “procedural step that precedes public release.” The agency has not yet made the text public, so the specific provisions remain unclear. However, the interim final rule, once released, would take effect immediately upon publication, bypassing the standard notice and public comment period. If the interim rule goes beyond the title’s suggestion (e.g., excluding casino-style products) and provides tacit authorization for sports-event contracts, it could prompt immediate APA (Administrative Procedure Act) litigation in federal court,” Wallach said. The second CFTC rule proposal is titled, “Further definition of ‘swap’ to include event contracts.” That rule is expected to amend the definition of a swap to include event contracts tied to sports, pop culture, and other outcomes not traditionally included in the institutional definition. For decades, prediction markets primarily served as speculative hedging instruments for agricultural and energy producers. Only recently have the exchanges ushered in retail traders, opening a new era of event-based trading. Cases Continued Federal courts have recently questioned the CFTC’s claim that it has the “exclusive jurisdiction” over prediction markets and what they can offer for trading. Judges have also raised concerns about whether sports event contracts are swaps, and if states have the power to enforce their gambling laws on prediction markets. The Supreme Court has been asked to clarify the CFTC’s powers regarding prediction markets. There is no official timeline on when the court might announce whether it will accept the petition filed by New Jersey. The post Don’t Bet on Casino-Style Slots and Table Games Coming to Prediction Markets appeared first on Casino.org.