.svg)
Uncertainty over how sports-events contracts will affect the sports-betting industry continues as senior executives with leading operators acknowledge the issue of whether they constitute unlawful sports betting will ultimately be determined by federal courts.
Until then, most executives believe there has been no impact from prediction markets on their regulated sports-betting businesses and some may even look to participate in offering event contracts once several lawsuits by state gaming regulators have been resolved.
“We’ve been very focused on ramping up for education on that market opportunity, making sure we are aware of all the possibilities, should that market persist and grow into a legal market that us and others are able to participate in,” Richard Schwartz, CEO of BetRivers-operator Rush Street Interactive, said during a first-quarter earnings call on Wednesday (April 30).
Schwartz stressed that should there be an opportunity for licensed gaming operators to participate in the sports-event contract market, “that’s really something we would consider at that time”.
“There’s no impact so far in that business for us,” Tom Reeg, CEO of Caesars Entertainment, told analysts Tuesday during the company's own quarterly earnings call. “Your opinion is as good as mine in terms of what’s going to happen.”
“If there are ways to drive more EBITDA through our business that open up through legislation or regulation, you should assume that we’re going to look to how we can take advantage of those opportunities to the greatest extent possible for our shareholders,” Reeg said.
Federal judges in New Jersey and Nevada both recently sided with exchange operator Kalshi instead of gaming regulators in issuing a temporary halt to efforts to take action against the company for offering illegal wagers. Kalshi and Crypto.com also filed lawsuits against the Maryland Lottery and Gaming Control Commission who demanded the companies stop offering the contracts.
Robinhood and Crypto.com are also offering trading on sports events. Kalshi has argued that the Commodities Futures Trading Commission (CFTC) has exclusive rights to regulate the single-game event contracts the company is offering.
Kalshi also invoked the Supremacy Clause found in Article VI of the U.S. Constitution that dictates that federal law, including Constitution, federal statutes and treaties, takes precedence over state laws when there is a conflict. In other words, the powers given to the CFTC by the Commodity Exchange Act (CEA) override a state’s laws regulating gambling.
The CFTC has declined to take any action on prediction markets, or sports-event contracts, and canceled a roundtable tentatively scheduled for Wednesday to discuss the issue with tribal gaming operators, lobbyists for the commercial gaming industry, state gaming regulators, and prediction market companies.
Adam Greenblatt, CEO of BetMGM, the joint venture between MGM Resorts International and Entain, noted that prediction markets “live at the intersection between states' rights and who has the jurisdiction to regulate gaming at a state level”.
Greenblatt expected the legality of prediction markets to be determined by the courts.
“Whether it represents a risk or an opportunity, there are elements of both, actually,” Greenblatt said Monday. “But in our existing online sports-betting states, it represents a degree of small risk, only because the markets that prediction markets serve would be lower-margin for operators.”
Greenblatt also suggested that sports-event markets are a niche business that do not offer the same experience that sports-betting operators provide their clients through more sophisticated offerings such as same-game parlays. Rob Wood, Entain’s CFO and deputy CEO, and Stella David, the company’s recently appointed CEO, did not address prediction markets during their first-quarter trading update on Tuesday.
“While it certainly is something we are monitoring … we will participate if required,” Greenblatt added.
Maryland, Michigan Regulators Oppose Event Contracts
John Martin, director of the Maryland Lottery and Gaming Control Agency (MLGCA), expressed his opposition to sports-event contracts being offered in Maryland in official comments submitted Wednesday to the CFTC.
“This activity puts our citizens at risk by ignoring carefully crafted statutory and regulatory safeguards developed in each of our states and jeopardizes the critical tax revenue derived from sports wagering across the 40 jurisdictions where it is authorized,” Martin wrote.
Currently, sports betting is live and regulated in 39 states, with neighboring Missouri set to launch legal sports wagering later this year.
Earlier this month, the MLGCA sent cease-and-desist letters to Kalshi, Crypto.com and Robinhood ordering them to remove access to their sports-event contracts in Maryland.
Everett Browning Sr., chair of the Maryland Lottery and Gaming Control Commission, confirmed Wednesday that the commission had discussed the lawsuits in closed session, but regulators have not taken any action.
Martin’s written comments came a day after the Michigan Gaming Control Board filed a letter with the CFTC expressing its concern regarding sports-event contracts.
In a letter to acting chair Caroline Pham, MGCB executive director Henry Williams emphasized that these contracts, or financial positions based on the outcome of sports events, are equivalent to internet sports-betting wagers that are subject to the Lawful Sports Betting Act (LSBA).
“The offering of sporting event contracts by CFTC-regulated entities, without adherence to Michigan’s licensing requirements and in a manner that may not meet prescribed consumer protections, exposes Michigan residents to unnecessary risk and undermines public trust,” Williams said.
Currently, gaming regulators from five states — Illinois, Michigan, Maryland, Pennsylvania and Tennessee — have submitted comments to the CFTC on prediction markets.
“We are particularly concerned that such contracts are being promoted as investment opportunities, a message that directly contradicts Michigan’s responsible gaming principles,” Williams said.
Williams urged the CFTC to consider these concerns as it evaluates whether sports-event contracts serve the public interest.
