A state-regulated sports prediction platform is hoping to be available nationwide to compete against trading companies that are offering similar sports-event contracts.
Key Takeaways
- Sporttrade CEO Alex Kane says prediction markets are sports betting, and he doesn’t anticipate retaliation from state regulators if his request is permitted
- Kalshi, Robinhood, and Crypto.com have come under fire in several states with legal sports betting
- A shift could lead sportsbook companies to enter the prediction market
Sporttrade CEO Alex Kane told Sportico in an interview that his company sent a letter to the Commodity Futures Trading Commission on April 25, formally requesting federal approval to operate in all 50 U.S. states just like Kalshi, Robinhood, and Crypto.com.
Kane believes those sites regulated by the federal agency are doing “irreparable harm” to Sporttrade’s product, offered in Arizona, Colorado, Iowa, Virginia, and New Jersey, and putting the operator at a competitive disadvantage. Sports betting companies, which Philadelphia-based Sporttrade falls under, are licensed by and answer to state regulators with rules and laws differing in each market.
Prediction market platforms are not regulated at the state level but offer contracts on NBA, MLB, NHL, golf, and other sports that can be purchased similarly to placing bets at a sportsbook.
Kane hopes the CFTC sees his point and grants the operator full U.S. access.
“You’re not going to hear me say this isn’t sports betting,” Kane said in the interview about prediction markets. “That’s a ridiculous comment.”
No stopping Kalshi
Those three prediction platforms have come under fire in recent months for offering sports-event contracts in states that have legal sports betting. Nevada, New Jersey, and Maryland are among several states that have told Kalshi and others to stop operating in their jurisdictions without a license. The prediction market platform received an injunction in the Garden State this week.
Kalshi has pushed back, filing lawsuits and claiming that the CFTC, not state regulators, is the only government agency that can keep them from offering sports-related markets.
“We are literally like a financial exchange, but the underlying trading is events,” Kalshi founder Tarek Mansour said last month. “The CFTC is our regulator. If the CFTC tells us to stop, we will absolutely stop. If they don’t, then we won’t.”
Should Sporttrade be approved to be regulated federally and offer its product nationwide, it could put the company in a place no operator has been before: licensed federally and at the state level at the same time. Kane said he doesn’t fear retaliation.
“I know our regulators well,” he added.
Ready for anything
Sporttrade is the first licensed sports betting operator in the U.S. to formally seek federal regulation involving prediction markets. Other traditional sportsbook companies have investigated going a similar route.
Rush Street Interactive CEO, Richard Schwartz, said on Wednesday during his company’s quarterly earnings call that the online sports betting operator is “aware of all possibilities” and prepared if there is a legal shift in the industry.
“Should there be an opportunity, if licensed operators like us, on a state-by-state level, are able to participate in that market, that’s really something that we would consider at that time,” Schwartz said.
As of now, Schwartz said there is a limited amount of liquidity in prediction markets, but they are expected to grow.
That could be one reason the CFTC has delayed defining sport-event outcome platforms. The federal agency recently canceled a roundtable discussion on the matter, which industry leaders were hoping would provide some legal clarity.
