Agency that checks prediction markets is in over its head, gambling industry leaders tell Congress

The federal agency that regulates the U.S. prediction markets is a rogue agency making a mockery of congressional intent, Bill Miller, CEO of the American Gaming Association, told Congress on Wednesday.

The Commodity Futures Trading Commission was created to “regulate markets critical to the functioning of the nation’s economy, not to regulate ’Monday Night Football,’” Mr. Miller said to the Senate Subcommittee on Consumer Protection, Technology and Data Privacy.

In 2010, Congress authorized the CFTC to prohibit prediction markets from offering contracts involving gambling and related activities.

“In doing so, they stated the rule was consistent with our congressional intent, and the CFTC prohibited sports betting contracts for more than 15 years under this rule,” said Sen. Maria Cantwell, Washington Democrat and ranking member of the Senate Committee on Commerce, Science and Transportation. “But all of a sudden, starting in 2025, prediction markets began offering sports gambling contracts.”

Prediction markets claim that they’re sports event contracts and investments, hence not subject to state or tribal gambling laws, Colorado Sen. John Hickenlooper, ranking member of the subcommittee, said.

Mr. Miller said that doesn’t make for a fair and level playing field.

He said that “so-called” prediction markets are “deceptively calling sports betting financial contracts and investing, despite messaging designed to beguile policymakers and the public.

“They are increasingly being exposed as backdoor sports betting operations.”

Such markets are not required to comply with any regulatory safeguards involving anti-money laundering, cybersecurity and integrity monitoring, Mary Beth Thomas, executive director of the Tennessee Sports Wagering Council, said.

Patrick McHenry, senior adviser for the Coalition for Prediction Markets, argued his industry has higher surveillance standards than casinos and ban users proactively, while the CFTC requires know-your-customer and anti-money laundering compliance.

He said those in his coalition adhere to higher standards than the average state rules. While lawmakers decried gambling advertising to minors, Mr. McHenry said a dozen states that have legalized gambling don’t ban advertising to children. Prediction markets have “a complete ban of anyone under 18 from touching these products,” he said.

But the regulator, the CFTC, has “literally no experience in regulating sports betting, even where CFTC has failed to use the authority it does have to protect sports bettors from insider trading, market manipulation, predatory advertising and financial instability,” Mr. Hickenlooper said. “This workaround is merely a way for prediction markets to skirt state consumer protection laws.”

Mr. Miller cast doubt on the CFTC’s capacity to regulate a national sports betting network, as it employs roughly 500 people — fewer than the regulators in Pennsylvania.

The idea that “somehow or another they could manage and facilitate a nationwide sports betting network is laughable,” he said.

Mr. Miller argued that it was never Congress’ intent to create a “federal Department of Gambling” through the CFTC. He said 41 state attorneys general have written the CFTC, saying, “Stop it, knock it off, it’s not your purview,” because the states’ top prosecutors agree that states have the right to regulate.

Now they are “spending extraordinary amounts of money in litigation” against the CFTC, which has inserted itself as a party using taxpayer dollars to assert its “control and dominance in a world that they, quite frankly, have no business being in,” he said.

Mr. McHenry, the former chair of the House Financial Services Committee, refuted the claims that the CTFC can’t handle its job.

“The CFTC is a cop on the beat, has the capacity to oversee this market just as they’ve done with a broader commodities marketplace that’s been around and well-versed for decades,” he said.