The man in charge of regulating prediction platforms such as Kalshi and Polymarket told Axios this week that sports betting and predicting are “two separate things.”
Michael Selig, chair of the Commodity Futures Trading Commission (CFTC), has one of the most important voices in the ongoing battle between state gaming officials and licensed prediction operators.
Key Takeaways
- Selig is the only acting chair of what is usually a five-member board.
- Sportsbooks were deemed "entertainment," while prediction markets were called a financial tool.
- The CFTC has filed to block states from attempting to restrict prediction markets.
Selig established his primary argument by dividing the general nature of sportsbooks and prediction outlets. He claimed that individuals who engage in sports betting do so for entertainment, while prediction platforms are more of a financial tool.
“They're different models,” Selig said in an interview. “The conventional sportsbooks and casinos are entertainment and they have a lot of authority to be able to kick people out when they keep winning.
“When you go to the derivatives markets, that's now allowed. You keep winning? Great. You take your earnings.”
The CFTC chair pointed to political analyst and gambler Nate Silver as an example.
As commonly occurs when bettors consistently beat sportsbooks, Silver’s account was limited, according to his book “On the Edge.” That meant that he wasn’t allowed to place bets over a certain dollar amount, inherently capping his opportunity for wins.
Prediction platforms do not have the same standards for winning users.
Prediction market prices are also influenced by real-time customer sentiment and simple market dynamics, Selig argues. Sportsbook betting odds are house-made, meaning that rather than having peers compete against their peers, they are battling an institution.
Enjoying Covers content? Add us as a preferred source on your Google account“What you're seeing is markets versus entertainment,” Selig said. “For those that want the discipline and integrity of a market, it's a better model. For those that want entertainment, the casinos might be the model for them.”
Gambling and predicting are “separate”
The ongoing war between prediction markets and, primarily, state gaming officials, has only increased as prediction markets have hit mainstream audiences.
The American Gaming Association, a trade group representing sports betting companies and casinos, has supported the push to restrict prediction markets. The group claimed that prediction markets offer gambling services without being required to meet consumer protection standards established in states that legalized sports betting.
Selig, an appointee of President Donald Trump, does not agree. While he agreed that there may be “cross-pollination” between users of sportsbooks and prediction operators, he maintained that they are distinctly different.
Under Selig’s oversight, the CFTC has already filed to block states from restricting prediction platforms from operating in their jurisdictions. That includes states that did not legalize sports betting, but must allow prediction platforms to offer sports event contracts, where users buy and sell outcomes across the world of sports.
If Selig’s latest comments are any indication, his stance only appears to be strengthening.
Momentum on the federal side
Selig is the only sitting member of what is usually a five-commissioner CFTC board, giving him a larger-than-usual say over the direction of the prediction industry.
State officials are effectively at the mercy of CFTC-licensed prediction operators without federal intervention. Federal law preempts state law, and prediction operators have largely ignored, if not sought legal action, against state officials who have attempted to block their markets.
In relevant prediction markets news, renowned anti-gambling official and Texas Lt. Gov. Dan Patrick is still aiming to kick prediction operators out of Texas. The man in charge of his state’s Senate asked senators to close a “loophole” that allowed prediction operators to enter Texas without local approval.
