CFTC warns prediction markets over gambling-style odds

The CFTC has warned regulated prediction markets against displaying American-style gambling odds as state authorities intensify efforts to classify sports event contracts as unlicensed betting.

The CFTC told regulated prediction markets to avoid American-style odds in product displays.

Platforms must comply with derivatives laws and avoid deceptive marketing or solicitation practices.

New York is seeking at least $36 billion from Kalshi over alleged gambling violations.

Kalshi has requested emergency protection from Utah enforcement while it pursues an appeal.

The Commodity Futures Trading Commission instructed regulated prediction market platforms not to display contracts using American-style gambling odds, according to an Aug. 7 Bloomberg report.

American odds typically show potential returns using positive and negative numbers, such as +150 or -200. Sportsbooks commonly use this format, while prediction markets usually price contracts between $0 and $1 based on the implied probability of an event.

The CFTC also reminded registered entities that event contracts remain subject to U.S. derivatives laws. Platforms must avoid "deceptive" practices when listing, advertising, or soliciting trades in these products.

The guidance suggests that federal registration does not allow prediction markets to advertise their products in a manner that makes them indistinguishable from conventional sportsbooks. It comes as the agency continues defending its authority over event contracts against state gaming regulators.

The CFTC maintains that designated contract markets fall under its exclusive jurisdiction through the Commodity Exchange Act. State officials argue that contracts tied to sporting events constitute wagers and require local gambling licenses.

New York became the latest state to escalate the dispute when Attorney General Letitia James sued Kalshi on July 31. The state is seeking at least $36 billion in damages and penalties.

The complaint alleges that Kalshi operates an unlicensed gambling business by allowing New York residents to trade contracts on sports and other events. Kalshi has denied that characterization and argues that its status as a CFTC-regulated exchange places it outside state gambling oversight.

The dispute extends well beyond New York. Attorneys general from 44 states recently urged the CFTC to withdraw and rewrite its proposed prediction market rules. They argued that states have traditionally regulated sports betting and should retain authority over sports-related contracts.

Courts have also questioned the federal regulator's position. A Wisconsin federal court rejected the CFTC's request to prevent state authorities from applying gambling laws to prediction platforms.

Washington secured a preliminary injunction against Kalshi in July. The court found that federal derivatives law did not prevent the state from enforcing its gambling restrictions.

Kalshi filed an emergency motion for an injunction pending appeal after a Utah federal court ruled that the state could enforce its anti-gambling laws against prediction markets.

Gaming law expert Daniel Wallach said the company requested expedited relief because it fears Utah Attorney General Derek Brown could pursue civil or criminal charges while the appeal remains pending.

The ruling rejected Kalshi's claim that the Commodity Exchange Act prevents Utah from regulating its sports event contracts. Kalshi intends to take the dispute to the U.S. Court of Appeals for the Tenth Circuit.

Utah residents could still access the platform immediately following the decision, but Brown indicated that the state planned to enforce its gambling laws. The state has not disclosed what form that enforcement will take.

The latest warning shows that the CFTC's support for federal jurisdiction does not remove compliance obligations for prediction market operators.

The agency has also pursued misconduct on regulated platforms. Former U.S. Representative George Santos recently agreed to return $17,569.98 in trading gains, pay a $17,500 penalty, and accept a three-year trading ban over Kalshi contracts.

The CFTC's warning could require platforms to review how they display contract prices and promote sports-related products. Meanwhile, pending appeals in Utah and other states will help determine whether federal registration can shield prediction markets from local gambling laws.

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