- CFTC is scrutinizing Crypto.com and Kalshi’s Super Bowl contracts, which might result in regulatory action.
- Prediction markets are expanding, but stronger regulations may influence future event-based trading goods.
Booming predictions markets, however, have regulators taking a good close look. According to a Bloomberg report, the Commodity Futures Trading Commission is scrutinizing both Crypto.com and Kalshi Inc. over their recently launched Super Bowl event contracts. This indicates possible regulatory headwinds for this rapidly growing sector of event-based trading.
Crypto.com, which operates a U.S.-based derivatives exchange, on Dec. 19, gave the CFTC notice of its intent to launch Super Bowl-related contracts by Dec. 23. This left regulators little time to review the products before the holiday season. Weeks later, the CFTC has turned up the heat on its oversight, seeking more details from firms that self-certify their financial offerings.
CFTC Scrutinizes Contracts for Super Bowl Event as the Market Grows
Under the derivatives laws of the United States, regulators require self-certified contracts to meet strict standards to prevent manipulation and ensure compliance. Though the CFTC cannot immediately intervene and stop trading on the contracts, the agency retains the capacity to enforce bans or introduce any new set of regulations. The CFTC Spokesperson stated that the contracts are being reviewed under existing regulations, and the possibility of future action is still open.
Crypto.com had been pretty aggressive in asserting that its event contracts are indeed legitimate and therefore should not be regulated by the CFTC. The company had withdrawn two sports-related filings previously before self-certifying a new contract that focused on spectator sports.
Meanwhile, Kalshi opened its “Kansas City vs. Philadelphia” Super Bowl market on Jan. 24 and already has notched nearly $2.5 million in trading volume. It also introduced contracts on brands likely to advertise during the game, generating over $1.5 million in activity.
The much larger prediction market industry as a whole continues to expand exponentially. In the 2024 U.S. presidential election cycle, The decentralized prediction platform handled over $2.5 billion in bets. It showed that there was indeed a huge appetite for event-based betting.
But with the CFTC cranking up the heat on the scrutiny, event-based trading in the U.S. is at a crossroads, and if regulators act to crack down on it, it could change the way companies like Crypto.com and Kalshi conduct business in this rapidly expanding market.
