Pennsylvania Gaming Control Board (PGCB) executive director Kevin O’Toole is seeking support from congressional leaders against the “significant threat” prediction markets pose to the state’s regulatory framework.
Key Takeaways
- Pennsylvania regulators say their framework is threatened by prediction markets that aren’t under state laws.
- The PGCB executive director says it’ll take too long for the CFTC to create a regulatory framework.
- The Keystone State has been operating legal online sports betting since 2019.
O’Toole recently sent a letter to two U.S. Senators and 17 Representatives requesting that they ask the Commodity Futures Trading Commission to consider the issues of what he called a “jurisdictional clash” between unregulated sports event contracts and sports betting that operates legally in the Keystone State.
“For decades, Pennsylvania has demonstrated its ability to oversee a successful and safe gaming environment,” O’Toole said in the letter. “We urge you to recognize and support the state’s role in this area. Maintaining the integrity of our established regulatory framework is paramount to protecting the public interest, ensuring consumer safety, and safeguarding vital state revenue streams.”
Fight for regulation
Prediction platforms, like Kalshi and Robinhood, are currently available in all 50 U.S. states and regulated by the CFTC, which has not taken a hard stance on the offerings of contract trading for NFL, MLB, NBA, NCAA, and other sports markets.
The PGCB executive director stated prediction market companies “side-step” state regulations by labeling their markets as “financial derivatives” despite offering spreads and totals similar to those of state-regulated sportsbooks.
“Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law,” O’Toole wrote. “These markets effectively create a backdoor to legalized sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight.”
Issues with CFTC
O’Toole outlined several concerns other gaming regulators have pointed to that are created by “wild west” prediction markets, including a lack of integrity oversight, responsible gaming protocols, and protections. He said the CFTC is not equipped to provide the kind of regulations that legal sports betting states currently offer.
“The CFTC’s framework is designed for derivatives markets often involving sophisticated institutional participants,” O’Tool wrote. “In contrast, state gaming regulators prioritize consumer protection for the public, implementing detailed measures for responsible gaming, age verification, and problem gambling prevention.
“With all due respect to the CFTC, it would take years for them to create the regulatory system and oversight that state gaming authorities have in place, which would also create a redundancy for a system that already exists and works exceptionally well.”
Ongoing battle
Pennsylvania, which has been operating legal online sports betting since 2019, is not the first entity to voice concerns over prediction markets. The PGCB joins a growing list of jurisdictions in the regulatory battle, but Pennsylvania has yet to take any legal action.
Kalshi is involved in lawsuits with regulators in Nevada, Maryland, Massachusetts, New Jersey, and Ohio. The prediction platform is fighting for the ability to continue offering contracts without interference from regulators, who argue that state laws prohibit prediction markets.
