U.S.: Federal panel Proposes New Definition for Sports Betting Regulations

Tensions between federal and state gaming regulations

Betting on a football score isn't gambling. At least not according to the federal Commodities Futures Trading Commission.

The commission recently proposed regulations to strengthen its governance over prediction markets and sports betting. The changes involve how the panel defines "gaming" and "gambling."

The proposal defines regulations for the CFTC's oversight of gaming, aimed at skill-based games but with limits on bets related to war and other extreme markets.

The move is the latest development involving the CFTC at a time when the gambling industry opposes prediction markets in Nevada and elsewhere in the U.S. It's also a matter of jurisdictions: State gaming boards oversee casinos and gambling.

The CFTC’s extensive prediction markets proposed rule making from June 12 is the latest move in the argument over prediction markets and their place in the wider gambling world, reflecting a new definition of gaming.

CFTC's document 

According to the CFTC's document about the rule changes, gaming is for recreational or entertainment purposes and exists within a set of rules, where the result is determined by the player based on skill, luck or otherwise.

Gaming, according to the CFTC proposal, is largely defined in contrast to contests and gambling.

“The Proposal defines gaming functionally and distinguishes games from contests such as elections and awards,” read the CFTC document. “Within gaming, the Commission aims to permit contracts settled on aggregate sports outcomes with objective data and integrity infrastructure, while prohibiting pure-chance games and high-risk sports-adjacent designs (e.g., injury, officiating-only, discrete actions, altercations, pre-collegiate events).”

The rule proposal would give CFTC the right to oversee bets made on sports scores and other gaming results. This is in contrast to what it defines gambling as, placing bets on contests like the Nobel Peace Prize or political events, as well as the more minute parts of sports – like what color Gatorade is poured on the Super Bowl winning coach.

The CFTC rules would also ban bets related to terrorism, assassination and war, which it argued would “present significant national security risks.”

Prediction markets have been criticized for offering betting lines on war and other controversial topics, such as a current betting line on Polymarket with over $600,000 in bets that asks, “Will Israel launch a major ground offensive in Gaza by …?” followed by a series of specific dates.

The CFTC said its new gaming definition is a public good, arguing it will increase regulation over prediction markets. The rules proposal gives any interested parties 45 days to comment on the changes, until July 27. The CFTC did not respond to questions from The Center Square.

Historically, the CFTC has regulated markets for raw materials and agricultural goods, called commodity markets. 

Prediction markets pushed the limits of the CFTC’s authority

In the last couple of years the CFTC has overseen regulation of prediction markets as the industry has grown in popularity. Prediction markets, which offer betting lines between users on a variety of subjects from sports to political events, have pushed the limits of the CFTC’s authority, according to many within the traditional gaming industry. 

“There’s no reason this should be regulated any different than people betting on the NFL,” Wayne Winegarden, a senior fellow at Pasadena-based Pacific Research Institute, previously told The Center Square. “You’d have to wonder why it would be.”

The American Gaming Association did not respond to questions on this story.

Nevada, along with many other states, has been through a series of lawsuits against prediction market companies, arguing the CFTC-regulated industry should be compliant with local gaming laws.