Threadbare oversight: CFTC under fire amid NBA warning on prediction markets
In an update to the ongoing legal battle of US states and prediction market platforms, The National Basketball Association (NBA) has become the second major US sports league to raise concerns in a detailed letter to the Commodity Futures Trading Commission (CFTC) about the rapid and unchecked growth of sports prediction markets. Major League Baseball submitted similar concerns on 7 March.
What are prediction markets?
Prediction markets are betting platforms where people can wager on the outcome of future events—everything from elections to sporting events. Kalshi, one of the key players in this space, has taken a bold step by offering contracts tied to sports outcomes, presenting them as legitimate financial instruments. But that categorisation is exactly what’s under fire.
As per the current law, the CFTC oversees derivatives and event contracts on federally regulated exchanges. Therefore, platforms like Kalshi, as argued by the company itself during its recent legal battles, are regulated by CFTC and not the state rules. However, the bone of contention is that in 2011, the CFTC implemented Rule 40.11, which , including gaming.
CFTC’s response?
There was widespread speculation that the CFTC would hold a roundtable on April 30 to address the issue. That never happened. Speaking with SiGMA News, Daniel Wallach, a nationally recognised sports gambling attorney, attributed this to several reasons. He said legal uncertainty from ongoing federal litigation, the absence of a confirmed CFTC chairman, and a tidal wave of public comments—many in opposition to allowing such markets—have all contributed to the delay.
Wallach said a major reason for the CFTC’s silence is an impending ruling from the United States Court of Appeals for the District of Columbia Circuit. The court is currently reviewing whether Kalshi can legally offer event contracts on congressional control—essentially allowing bets on election outcomes. However, Wallach believes that the ruling “may focus more on the overarching issue of what does ‘gaming’ mean, and what the CFTC’s obligations are in that regard.”
NBA’s concern: Prediction markets’ self-certification model
In a strongly worded letter, the NBA voiced its concerns about the lack of regulatory structure. The league pointed out that unlike traditional sports betting platforms—which require state approval—prediction markets like Kalshi operate through a self-certification model and do not require CFTC approval. Wallach said, “Self-certification process gives significant leeway and control to the exchange with threadbare oversight by the commodities exchange. And that’s concerning to leagues such as the NBA and Major League Baseball who are unable to get straight answers or have questions answered by these exchanges.“
Critics have also argued that under federal law, the outcome of the event—not just its existence—must have a clear economic consequence to qualify as a legitimate contract. “For instance, when the Knicks win a playoff game, it has direct financial impact on the team,” Wallach noted. Here, the impact is a positive one, which helps the team make more money. “And if players or insiders can hedge against that outcome, we risk compromising the integrity of the sport.”
Observers warn that unless the CFTC changes its rules—and receives new authority from Congress—it cannot lawfully approve these contracts. For now, Kalshi’s self-certification model continues to operate in a legal gray zone, raising questions about the future of sports prediction markets and who has the authority to regulate them.
