Calling out Michael Selig and the Commodity Futures Trading Commission (CFTC) has been in vogue over the last few weeks, and last Thursday American Gaming Association (AGA) President and CEO Bill Miller joined the chorus.
On analyst Steve Ruddock’s Straight to the Point podcast, Miller said he likes the gambling industry’s chances in court in the ongoing fight to tame prediction markets. He also said sports event contracts have “no economic consequences,” the Dodd-Frank Act (which amended the CEA) was not intended as a “back door effort to create a federal department of gambling,” and the current status of the CFTC is “ludicrous.”
Those comments were part of a wide-reaching interview, in which Miller made it crystal clear where the organization stands on the financial products that have been roiling the gambling world, sports betting in particular, for more than a year.
“I don’t believe that the federal government should be in charge of sports betting or gambling in any way,” Miller said. “I also don’t believe — and this is supported by decades of federalism, if not centuries of federalism — that authority that is not specifically granted by the Constitution rests with the states.
“And in our case, it’s not just the states. It’s the sovereign tribal nations that also enjoy those protections that were built into the Constitution from the beginning. There are decades and decades of court cases that support that premise. … Unless or until the federal government articulates that they are going to to take away that authority from the states,” it should remain with states and tribal governments.
Analyst: Sector on path of large asset growth
Amid the pushback, Citizens analyst Devin Ryan wrote Monday that despite the end of the NFL season, prediction market volume remained steady in January, and the same is expected for February. “Prediction markets are evolving from a niche, consumer-oriented, gambling technology into an emerging asset class, supported by improving market structure, accelerating volumes, and a clearer path toward institutional access,” he wrote. “This persistence suggests liquidity is expanding into a broader mix of recurring categories with growth beyond sports, as well.”
Analysts and others following prediction markets expected a “seasonal slowdown” following the end of football season, but Citizens instead is seeing “notable signs of progress and maturation in the industry.” In a December white paper, Citizens “argued that prediction markets are directionally mapping the early evolution of large asset classes in prior decades, most notably listed derivatives and, more recently, digital assets, and developments since December further reinforce the direction of travel toward our thesis.”
Prediction market Kalshi offered its first political contract ahead of the 2024 presidential election and its first sports event contracts ahead of the 2025 Super Bowl. Since then, competitor Polymarket and gambling companies DraftKings, Fanatics Betting and Gaming, and FanDuel, as well as others, have entered the space.
In addition, Kalshi has sued about 10 states — the latest is Tennessee — for the right to continue to operate, while the state of Massachusetts and tribes in California and Wisconsin have sued Kalshi to keep it from operating within their jurisdictions. A handful of courts have preliminarily banned Kalshi, though only Nevada is enforcing that decision.
Let the courts decide?
The ultimate definition of what a sports event contract is — prediction markets say they are derivatives, while the gambling industry says they are sportsbook clones — will likely be made by the U.S. judicial system. But Congress could step in and ban the products. Nevada Rep. Dina Titus filed a bill Feb. 10 that would do just that.
In the interim, CFTC Chair Michael Selig has come under fire after reneging on his confirmation-hearing promise that the agency would sit on the sideline as the issue winds its way through the courts. Since then, the CFTC has filed an amicus brief in Kalshi’s lawsuit against the state of Nevada, and Selig has directed the agency to craft rules around sports event contracts. In addition, he said the CFTC will withdraw a proposed rule that would have banned the markets, and wrote an opinion supporting the legality of sports event contracts.
Ryan, the Citizens analyst, says the moves provide more clarity for investors.
“The CFTC has taken an explicit proactive posture in asserting federal jurisdiction over event contract markets, helping reduce uncertainty around oversight and governance for institutional participants,” he wrote. Ryan also pointed to the January Federal Reserve research paper “Kalshi and the Rise of Macro Markets” that suggests “Kalshi markets provide a high-frequency, continuously updated, distributionally rich benchmark that is valuable to both researchers and policymakers.
“While this does not represent an endorsement of a specific product, we believe it strengthens the case for institutions to treat prediction market data as a credible analytical input alongside established tools, making it easier for data vendors, market structure firms, and asset managers to justify incorporating these signals into routine cross-asset decision-making, particularly around recurring macro and other financial catalysts,” Ryan wrote.
Super Bowl vs. location of Super Bowl
The Commodity Exchange Act (CEA), the law the CFTC was created to implement and enforce, traditionally has dealt with physical commodities, like the price of corn, wheat, oil, and soybeans.
Both the CEA and CFTC explicitly ban contracts related to “assassination, terrorism, war, or gambling,” yet several have offered contracts in the U.S. or abroad on several.
“The four no-fly zones are pretty clear,” Miller said. He and Ruddock did debate the merits of a market on, for example, where the Super Bowl would be played vs. the game itself:
Ruddock: I think there is a case to be made for something on the Super Bowl or the Kentucky Derby, but I don’t think there is much case for a three-team parlay in the middle of the baseball season. What is the utility of that?
Miller: I think even the Super Bowl is stretch in terms of the economic consqueence or economic utility. Maybe I could agree with should there be a prediction market on where the next Super Bowl will be announced, because that does have economic consequence around it. … But the notion that the Timberwolves-Raptors game on Tuesday has economic consequence, it’s strange. … It doesn’t pass the common sense test and it definitely doesn’t pass the constitutionality test that we are talking about.
Ruddock: How those games play out doesn’t change the economic activity around the game itself. But where that game is … does.
Predictions are ‘unregulated sportsbooks’
Miller’s comments follow those from politicians and Indian Country calling Selig out. Among the voices is chair of the Senate Agricultural Committee John Boozman, who last week suggested Selig duped his committee during confirmation hearings.
Miller challenged Ruddock to “find another government agency at the local, state, or federal level that allows the participants who are regulated by that agency to self-certify, and that they are adhering to the agency’s call. It’s absolutely ludicrous.”
CFTC-licensed entities can self-certify the markets they want to offer, and former acting chair Caroline Pham said last year that the agency has not pushed back once on self-certification in its 50-year history. As an example, the New York Post reported Sunday, “Online prediction sites Kalshi and Polymarket are fielding millions of dollars in wagers on [Trump’s State of the Union], with prop bets covering everything from whom Trump will attack to how long he’ll talk in his Tuesday address to the nation.”
“For an agency that actually has, I think, just one actual enforcement division that is working today, that is going to police, be the cop on the beat to make sure that insider trading isn’t happening ….” Miller said is impossible. He pointed to a host of questionable markets, including one offered on Polymarket (though not the U.S. site) around the removal of former Venezuelan President Nicolas Maduro, and a second on Coinbase CEO Brian Armstrong listing a bunch of words at the end of a presentation to satisfy “mention markets.”
“There is seemingly no consequence to that,” Miller said. The gambling industry has “8,400 regulators at the state and tribal level that every day seek to ensure that our people play by the rules. This is the wild west of the worst order.”
Later this week, Miller will host the AGA’s annual “State of Industry,” and it seems likely he’ll further reinforce the group’s stance.
“I think it is important to recognize that despite what the newly installed chair of CFTC talks about and these grand terms about the ‘golden age of prediction markets’ and that Kalshi and others have been in his terms ‘unfairly prosecuted’ by state attorneys general and gaming authorities around the county, he fails to say ever that sports is 90 percent of their business,” Miller said of Selig. “Yet we talk about this like the golden age and modernization of predictions. But we’re stating that these businesses are just unregulated, in our opinion, unregulated sportsbooks.”
