News: Major League Baseball Decries Lack Of Protections For Sports Betting At Prediction Markets
MLB wants an 'integrity framework' for sports event trading if the CFTC continues to allow gambling on sports nationwide; also, CFTC enters Nevada C&D to Kalshi into evidence in federal court case
Major League Baseball decried the current lack of protections around sports event trading via prediction markets in a letter sent today to the Commodity Futures Trading Commission.
However, MLB encouraged the CFTC to implement the same “integrity framework” that exists at the state level if it continues to allow sports betting via the likes of Kalshi and other platforms moving forward. The letter reads as if MLB would support sports event trading as long as the protections were equivalent to what exists today in the state-regulated industry.
The letter was penned by Bryan Seeley, Executive Vice President of Legal & Operations for MLB. Here are some of the key passages:
As the resemblance between sports event contracts and traditional sports betting markets continues to grow, so too does the need to replicate the integrity and consumer protections that exist at the state level. Currently, those protections are lacking. …
MLB has supported legal sports betting at the state level based on robust regulation and relationships in which sports leagues are viewed as partners and integrity of competition is considered paramount. If the CFTC decides to permit sports event contracts, this same integrity framework should be applied.
"Today's CFTC filing by Major League Baseball evidences how closely sports leagues are following recent developments in the sports prediction market space," said Ryan Rodenberg, a professor at Florida State University who has been following the current Kalshi litigation closely. "As one of the five plaintiffs who sued New Jersey, Major League Baseball — and the other co-plaintiffs from the Supreme Court sports betting case — will likely seek to be involved directly in any forthcoming CFTC rulemaking pertaining to sports-specific prediction markets."
The letter appeared just days after Nevada regulators sent a cease-and-desist to Kalshi, saying the prediction platform was offering illegal gambling in the state. That letter was then entered into evidence by the CFTC in its ongoing litigation against Kalshi; more on that below.
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Where things sit with sports betting at prediction markets
So far, we have sports event trading at two platforms: Kalshi and Crypto.com. There are dozens of markets available at the former; Kalshi has already pushed into single-match betting in tennis and soccer.
A month ago, Kalshi filed and self-certified the ability to offer markets on single games in leagues like MLB and the NBA, but so far, no markets like that have been offered. You can currently bet on the World Series and the winners of the National and American leagues in baseball. The sports offering Crypto.com is far less robust.
Indeed, we’re still mostly reading tea leaves about the CFTC’s intentions around sports betting at prediction markets. While sports event markets are live, the CFTC had asked Crypto.com to pause its sports offerings after launching them. However, that ask was made under the outgoing Biden administration. Robinhood also backtracked on partnering with Kalshi to offer markets on the Super Bowl one day after announcing it would take bets on the biggest game in the NFL.
The CFTC is now under the leadership of an acting chairman that’s been a proponent of prediction markets; the incoming chair of the CFTC, Brian Quintenz, is a member of Kalshi’s board. The son of the president, Donald Trump Jr., is an advisor to Kalshi.
The MLB letter came after a deadline from the CFTC for comments ahead of a roundtable about the future of prediction markets slated to take place sometime this spring. It will also be interesting to see if other major US sports leagues follow MLB’s lead on this issue.
Will the CFTC do what MLB asks?
It’s not clear to what extent the CFTC would be willing to adopt the same standards that exist in the regulated sports betting industry. What the MLB asks requires a rigorous system to be put in place at Kalshi and other platforms that doesn't exist in any meaningful form.
Just this week, there have been questions about the integrity of one of the markets that Kalshi offered on viewership of the Oscars.
In any event, the statement from MLB was far from full-throated opposition of sports prediction markets. It seemed like the league is hedging its bets on what may happen moving forward and trying to put itself in the best possible position to effect change.
Update on the CFTC case against Kalshi
Meanwhile, the ongoing CFTC court case against Kalshi in federal court on the legality of political event contracts appears to be continuing in the appeals process.
On Thursday, counsel for the CFTC put the Nevada cease and desist letter to Kalshi into evidence and wrote:
The Order is relevant to two issues on appeal: whether election betting contracts involve “gaming” and whether election betting contracts involve “activity that is unlawful under any” state law. The Gaming Board notified Kalshi that by offering “wagering” on election outcomes without a Nevada gaming license, Kalshi is violating Nevada law. The Gaming Board further advised that even if Kalshi had the appropriate gaming license, offering wagers on election outcomes would still violate Nevada public policy. Accordingly, the CFTC submits the State of Nevada’s Order for the Court’s consideration.
The continuance of the appeal is a strange development in the machinations around expanded prediction markets in the United States. Some had believed that the friendly stance of the CFTC would mean that the ongoing case would be abandoned, but that appears not to be the case, for now.
You can read the CFTC filing in the United States Court of Appeals For the District of Columbia Circuit (including the full letter from the Nevada Gaming Control Board to Kalshi) here:
The full MLB letter
The full letter from MLB to the CFTC is below, and can also be downloaded here.
Dear Acting Chairman Pham:
I write on behalf of the Office of the Commissioner of Baseball (“MLB”) to share our current perspective on sports event contracts. We appreciate the opportunity to comment, and applaud the CFTC’s focus on this important topic.
Protecting the integrity of competition is, and always has been, MLB’s top priority. We have an obligation to our fans and our sport to mitigate threats to that integrity. To that end, as individual states have legalized sports betting across the country over the last several years, MLB has worked hard to (1) incorporate strong integrity protections in state sports betting laws and regulations, (2) establish partnerships with legal sportsbooks that facilitate information sharing for integrity purposes, and (3) build collaborative relationships with state-level gaming regulators. MLB has also invested heavily in integrity monitoring services, sports betting educational programs, and other compliance initiatives. These collective efforts have helped MLB detect, and in many cases prevent, violations of its internal sports betting policies and uphold game integrity.
The sports event contracts that exchanges have recently offered resemble sports betting. The limited MLB event contracts available today do not carry the same integrity risks as prop bets or even single-game bets, but we expect that equivalent offerings will arrive soon. As the resemblance between sports event contracts and traditional sports betting markets continues to grow, so too does the need to replicate the integrity and consumer protections that exist at the state level. Currently, those protections are lacking. For example, MLB is not aware of anything that would require exchanges and brokers to notify leagues of potential threats to game integrity, cooperate with league investigations into player, umpire, or employee misconduct, or share data for integrity purposes. MLB has been advised that some exchanges and brokers take the position that they are not even permitted to share information with MLB under current CFTC regulations.
MLB has supported legal sports betting at the state level based on robust regulation and relationships in which sports leagues are viewed as partners and integrity of competition is considered paramount. If the CFTC decides to permit sports event contracts, this same integrity framework should be applied. MLB looks forward to continuing to engage with the CFTC, exchanges, brokers, and other interested parties on these issues. Please do not hesitate to reach out with any questions, and thank you again for including MLB in this process.
Sincerely,
Bryan Seeley
Executive Vice President,
Legal & Operations