Sports prediction markets have had a fowl problem for some time. In short, some people allege that the product looks like a duck (betting at a sportsbook), walks like a duck (to the casino’s sportsbook), and quacks like a duck (“come bet at our casino’s sportsbook”).
“They say this quacks like a duck, it looks like gambling,” a lawyer for Kalshi said earlier this year.
- The CFTC is pushing sports prediction markets to avoid resembling sportsbooks, including discouraging bookmaker-style odds.
- Proposed rules would also limit affiliated market makers from acting like a sportsbook house by requiring neutral, bona fide market-making.
- The moves suggest a broader goal of reinforcing prediction markets as peer-to-peer, market-priced derivatives rather than disguised sports betting platforms.
And polling suggests many Americans may agree with this characterization. For example, an Ipsos survey commissioned by the American Institute for Boys and Men found that 61% of respondents viewed buying event contracts as closer to gambling than to investing.
Of course, prediction markets would disagree.
Their arguments against being labeled a casino or sportsbook would probably include the ostensibly “peer-to-peer” nature of prediction markets, where buyers and sellers are supposed to find each other on the exchange to discover prices and provide hedging capabilities; and all under the federal regulatory umbrella of the Commodity Futures Trading Commission (CFTC), not state-level gambling rules.
So CFTC staff is worried that "bookmaker-style" odds for sports prediction markets could be a slippery slope that leads to... sports betting? pic.twitter.com/iL12wKCL0u
— Geoff Zochodne (@GeoffZochodne) August 10, 2026
So it’s unsurprising that the CFTC is making moves that suggest it, too, has heard enough about the duck.
The regulator has permitted prediction markets to offer sports event contracts and is going to bat for those operators in court, but its recent proposals and reminders signal the agency wants to ensure the exchanges avoid sportsbook-like appearances.
On Friday, for instance, the CFTC announced that its Division of Market Oversight and Market Participants Division had sent a letter to regulated operators, warning them that they may be breaking rules by providing “American”-style odds for their markets.
“Displaying pricing information for derivatives products in bookmaker-style odds is likely to mislead market participants about the nature of the transaction into which they are entering and may deprive users of access to indicia of market depth and pricing impact,” the letter said. “Further, market participant confusion between the two products could be exploited to drive participants into higher-margin, non-market-priced bookmaking products.”
The two divisions asked CFTC-regulated entities to review their pricing and marketing practices and confirm compliance by the end of August.
DROP THE DUCK ACT
In other words: Please don't act like a duck. You’re not supposed to look like a duck.
The CFTC also has another set of proposed rules out now that could be characterized as an anti-duck directive. The proposed regulations address “vertically integrated market structures” and potential conflicts of interest.
This would include the ties between an exchange operator and market makers that may share ownership.
“For example, a situation in which an exchange and a market participant (such as a market maker) on that exchange share common ownership presents conflict of interest concerns regarding an exchange’s enforcement of its rules for the affiliated participant,” the proposal notes.
A golden retriever suffering from seizures seemingly lost her spunk — until one day her owners brought home a miracle cure — a duck named Louie. @SteveHartmanCBS is On the Road. pic.twitter.com/6ZfnURuTvr
— CBS Evening News with Tony Dokoupil (@CBSEveningNews) August 7, 2026
In other words, it may look a bit awkward if prediction markets are supposed to be peer-to-peer, but Exchange X is offering you sports event contracts while its affiliated market maker takes the other side of your trade. To some, that may look like Exchange X is simply the sportsbook-like “house” in all this.
With that in mind, the CFTC isn’t proposing to prohibit “affiliate principal trading” entirely, as market makers do provide a service exchanges need, which is putting up money for the other side of trades.
What the CFTC wants to do instead is “distinguish bona fide market making” from “directional proprietary trading.”
“Such a bona fide market maker would be a firm that is contractually obligated to maintain continuous two-sided quotations, that is filled only after unaffiliated members at every price level ... and that may not establish directional positions other than in connection with its obligation to maintain two-sided quotations,” the proposal notes.
Enjoying Covers content? Add us as a preferred source on your Google account
No house, no fowl
In other words, a prediction market could have an affiliated market-making arm. It just has to operate neutrally and not receive favorable treatment from the prediction market company with which it is associated. It’s not supposed to be the “house”; it’s just there to help accomplish the goals of designated contract markets, such as price discovery.
“The harms identified … turn on the affiliate’s ability to convert operational and information advantages into proprietary profit, and on the exchange’s stake in the affiliate’s directional gains; the Commission preliminarily believes that confining such an affiliate to bona fide market making removes the principal mechanisms by which those harms are realized,” the proposal notes.
DraftKings estimates (based on its own analysis) that 80%-90% of prediction market consumer volume in states with legalized online sports betting is attributable to syndicates and institutional traders, "volume that mostly would not have been on Sportsbooks to begin with." pic.twitter.com/p0DqCdx4ix
— Geoff Zochodne (@GeoffZochodne) August 7, 2026
This may not be as noticeable a change as removing American odds, but it’s a clarification that could be used to tamp down the duck talk. While your “peer” on a prediction market may still be a professional market maker, it may not belong to the same family of companies as the exchange on which you trade.
“Derivative products are traded between counterparties at market-determined prices and are cleared by centralized clearinghouses,” the CFTC staff letter noted last week. “Entities that list, solicit, or accept event contract products lack control over contract prices as the price of a given contract is determined through a process of competitive bidding amongst market participants.”
Those are perhaps a lot of complex words and phrases, and some might still read them and say it amounts to sports betting. But if the CFTC can quell some of the quacking with these moves, that may be a win on its own.
