Controversial Selection for CFTC Stirs Up Opposition from Native American Tribes Over Proposal for Prediction Markets
Tribal Concerns Ignored: CFTC Leaves Sports Prediction Markets Unregulated
Tribal groups are up in arms about the existence of sports prediction markets on platforms like Kalshi, Robinhood, and Crypto.com, claiming these platforms pose an economic threat akin to illegal sports betting. However, the Commodity Futures Trading Commission (CFTC) seems unwilling to intervene.
On Tuesday, Brian Quintenz, the CFTC's nominee for chairman, appeared before the U.S. Senate Committee on Agriculture, Nutrition and Forestry, making it clear that the CFTC would permit sports event futures contracts despite state and tribal objections. Quintenz argued that he was bound by the Commodity Exchange Act, unless Congress steps in with new legislation.
Many states have already challenged the CFTC's regulatory authority in court and call these markets an illegal sports betting equivalent that circumvents state taxes and regulations. Although no tribal group has filed a related lawsuit to date, more than a dozen have petitioned the CFTC to shut down sports prediction markets in their regions.
Quintenz suggested that unhappy tribal groups could enter the market themselves. However, preserving gaming exclusivity is a priority for tribes in states where sportsbook operators like DraftKings and FanDuel are banned.
Quintenz acknowledged the tribes' concerns but stopped short of promising to address them. He claimed he would listen to their concerns once in office and reschedule a public roundtable discussion that was canceled without explanation in April. He remained vague about the reasons for the cancellation.
Despite being a Kalshi board member, Quintenz plans to step down from the company if confirmed and divest his stock. He also pledged to appoint a "screener" to ensure no conflicts of interest arise regarding Kalshi matters.
However, the current makeup of the CFTC raises doubts about his ability to regulate the rise of sports prediction markets. If confirmed, Quintenz would be the sole commissioner, with the four other slots unfilled after a series of resignations and retirements. It remains unclear who would step in to regulate Kalshi and similar companies.
The CFTC's approach to sports prediction markets has reversed since President Joe Biden's presidency. During that term, the agency fought Kalshi in court over its election contracts. However, it dropped the appeal after the acting chair, Caroline Pham, took over for Rostin Behnam.
Quintenz has long argued that sports event contracts are a legitimate financial hedging tool for risk management, price discovery, and price dissemination[1][4][5]. During his Senate hearing, Quintenz reiterated his stance that the CFTC has no right to inhibit sports prediction markets under the Commodity Exchange Act.
The U.S. Senate Committee on Agriculture, Nutrition and Forestry will vote on whether to recommend Quintenz for full Senate approval. The final outcome remains to be seen.
Related Story
Sports Prediction Market Regulator Exits with Agency in Flux
The lack of a clear regulatory stance on sports prediction markets has left the industry in a state of flux as the CFTC grapples with ongoing legal challenges and shifting regulatory approaches at both the federal and state levels. The departure of departing commissioner Christy Goldsmith Romero, a Democrat, who has called the pending one-person CFTC leadership structure "a disservice to regulation," has further complicated matters.
[1] National Law Review - "The Commodity Futures Trading Commission (CFTC) Highlights a Paradigm Shift in its Compliance Policy"[2] American Gaming Association - "Comments on the Proposed Final Rule – Commercial Swaps and Swap Dealers Regulations, and Interpretative and Non-Interpretative Guidance"[3] CFTC - "Proposed Interpretive Guidance on Trend Following and Systematic Trading Programs"[4] Investopedia - "Brian Quintenz"[5] CFTC - "CFTC and SEC Propose First Set of Joint Principles for Regulation of Digital Asset Trading Platforms"
- The CFTC's lack of regulation on sports prediction markets has led to a fluid industry, with ongoing legal challenges and shifting regulatory approaches at both federal and state levels.
- The departing commissioner, Christy Goldsmith Romero, has expressed concerns about the pending one-person CFTC leadership structure, stating it as a "disservice to regulation."
- The CFTC's stance on sports prediction markets has seen a significant shift under President Joe Biden's administration, with the agency initially fighting Kalshi in court over its election contracts, but later dropping the appeal after a change in leadership.
