As prediction platforms surge in popularity across the U.S., Massachusetts' gaming regulator has warned sportsbooks that are considering securing prediction partners.
Key Takeaways
- DraftKings and FanDuel both announced plans to offer event contracts.
- Massachusetts Gaming Commission did not rule out future regulation for prediction platforms.
- Sportsbooks must confirm they understand the warning.
The Massachusetts Gaming Commission (MGC) published a letter Thursday that told sportsbooks - several of which have already began exploring prediction allies - they risk losing their ability to operate inside state lines if they sign partnership deals.
“The (MGC) is aware that several Massachusetts sports wagering licensees are considering or have begun the process of partnering with entities in the prediction market space to begin offering event wagering contracts,” the letter to Massachusetts sportsbooks reads. “Please accept this letter as notice that you are prohibited from offering sports-related event contracts in Massachusetts, directly or via an affiliate, related business entity, or other association, or directing patrons to such event contracts being offered in Massachusetts.”
Prediction platforms recently began offering sports event contracts, which allow consumers to buy and sell contracts associated with different outcomes. For example, rather than betting the house odds of -120 for the Kansas City Chiefs to beat the Buffalo Bills, a user could spend $.51 to purchase a contract with a $1 payout that requires the Chiefs to win.
These platforms are regulated by the Commodities Futures Trading Commission and don’t need to achieve state-level licensing. That’s allowed them to operate in states both with and without legal sports betting markets.
Several sportsbooks have begun preparing to enter the prediction industry. DraftKings announced last week it would become the first major sportsbook to offer sports event contracts, while FanDuel said Wednesday it plans to launch sports contracts through CME Group in states without legal sportsbooks.
MGC won’t completely rule out prediction regulation
The MGC’s letter highlights the difference of opinion that exists between state regulators and prediction outlets.
The letter defined wagering on a “sports event” and outlined the risks that sportsbooks face by signing a prediction partner. However, prediction platforms argue their markets are different from “wagering” since customers buy and sell contracts with other users.
Despite that discrepancy, the MGC threatened to pull the licenses of any sportsbooks that offer or promote prediction markets.
“In the event you offer sports-related event contracts in Massachusetts or direct patrons to such event contracts being offered in Massachusetts, the Commission may take steps up to and including revocation of your license,” the letter reads. “In addition, to the extent any other regulator takes action against your license due to your operation in the prediction market space, such action may inform decisions related to your suitability in Massachusetts.”
Sportsbooks were asked to submit a written response confirming they received the letter and detailing the steps they would take to ensure compliance.
While the MGC expressed strong opposition to prediction platforms teaming up with sportsbooks, it did not completely rule out a future in which prediction markets are authorized.
“This notice shall not be construed as the Commission waiving any rights with respect to future determinations related to prediction markets and event contracts,” the letter reads.
