The Michigan Gaming Control Board (MGCB) warned gambling operators that participation in sporting event contracts, like those offered by prediction markets, may jeopardize their state licenses. Several of Michigan’s licensees are considering offering prediction market services.
Key Takeaways
- Some prediction markets have begun offering sports event contracts that are not licensed nor taxed by the state.
- DraftKings and FanDuel are considering entering the prediction market space.
- Both federal and state regulators are warning prediction market operators about potential regulatory risks.
The recipients of the MGCB’s memorandum include commercial casinos, internet gaming operators, sports betting operators, fantasy contest operators, and their associated licensed suppliers. The message was clear: Michigan operators could lose their licenses if they provide or facilitate sports event contracts. This may be true even if the contracts are not available within the state.
The memo, issued by MGCB executive director Henry Williams on Friday, states there could be a problem with a firm “partnering, coordinating, or associating with an entity that operates offers, or facilitates access to sporting event contracts in any jurisdiction other than Michigan in which a regulatory body, law enforcement agency, or other governmental authority has expressly objected to or acted in any way to prevent or cease the offering or sporting event contracts in such jurisdictions.”
Michigan sports betting providers DraftKings and FanDuel have stated they're considering entering the space.
Some prediction markets have started to offer sports event contracts - even parlays. Since prediction markets are not licensed nor taxed by states, many jurisdictions have taken issue with their services. Ohio has already warned its licensed sportsbooks they could lose their licenses if they offered sports event contracts inside or outside the Buckeye State.
Several states have issued cease-and-desist orders to prediction market operators or are embroiled in litigation with them. And it's not just the states. Prediction markets’ own regulator has warned about the potential consequences associated with sports event contracts.
Earlier this week, the Commodity Futures and Trading Commission (CFTC) issued an advisory to prediction markets offering sports event contracts. Although the CFTC regulates prediction markets, it made it clear the agency “has not, to date, been requested to take or taken any official action to approve the listing for trading of sports-related event contracts.”
Furthermore, the CFTC stated any prediction market offering sports event contracts should have plans in place to deal with the risks associated with state “regulatory actions and pending and potential litigation, including enforcement actions.” In other words, the CFTC is not, as of yet, providing regulatory cover for prediction markets offering sports event contracts.
