CFTC Warns Prediction Market Operators Against 'Deceptive' Moneyline Odds Practices
Key Takeaways
- •The CFTC has formally warned prediction-market operators against using American-style moneyline odds, citing potential deception and increased risk-taking behavior.
- •Prediction markets traditionally price contracts in cents that correspond directly to implied probabilities, whereas moneyline odds express potential returns on a $100 wager in positive or negative figures.
- •Kalshi, a leading CFTC-regulated prediction-market exchange, has stated it will comply with the agency's guidance.
- •CFTC Chair Michael Selig maintains that the agency holds exclusive federal jurisdiction over prediction markets, a position challenged by states and tribal gaming regulators seeking to apply local gambling laws.
- •The resolution of the jurisdictional dispute between federal derivatives oversight and state gambling authority could determine whether prediction markets are classified as financial instruments or gambling products.
The U.S. Commodity Futures Trading Commission (CFTC) has warned prediction-market operators against using American-style 'moneyline' betting odds, as the regulator moves to strengthen oversight of the rapidly growing sector that allows participants to trade contracts on the outcomes of future events ranging from elections to economic indicators.
In a letter obtained by Bloomberg, the CFTC instructed regulated entities to comply with the law and avoid 'deceptive' practices when listing, advertising, or soliciting contracts. The agency also referenced research indicating that American-style odds can encourage greater risk-taking in sports betting contexts.
Prediction markets conventionally quote contracts in cents, with prices corresponding directly to implied probabilities. Moneyline odds, by contrast, employ positive or negative figures to indicate potential returns on a $100 wager—a format more familiar to sports bettors than to participants in federally regulated derivatives markets.
Kalshi, one of the leading prediction-market platforms and a CFTC-regulated exchange, stated that it would comply with the CFTC's guidance.
The regulatory warning comes amid a broader jurisdictional dispute. CFTC Chair Michael Selig has asserted that the agency holds exclusive federal jurisdiction over prediction markets and has actively defended that position against states seeking to apply their own gambling and sports-betting laws to the platforms.
Tensions have escalated as prediction markets such as Kalshi and Polymarket have expanded rapidly, drawing substantial trading volume around elections, sports, and cultural events. The platforms have generally supported federal CFTC oversight, while some states and tribal gaming regulators maintain that sports-related contracts should remain subject to state gambling laws.
Lawmakers and tribal gaming interests have also pressed Congress to clarify the boundary between federal derivatives regulation and state authority over sports betting. The outcome of that debate could shape whether prediction markets continue to operate primarily as financial instruments or fall under the broader gambling regulatory ecosystem.
