CFTC Warns Prediction Markets Against American-Style Odds

The Commodity Futures Trading Commission (CFTC) has put prediction market operators on notice that American-style odds such as +100 or -100 have no place in the listing of sports-related event contracts. In a letter, the CFTC said derivatives must be priced in nominal or percentage terms that reflect market pricing, and it explicitly flagged the use of gambling-style odds to market a wager as prohibited.

Derivatives, not bets

The agency framed the issue as a matter of compliance rather than presentation, reminding firms that they must follow US laws governing derivative trades and refrain from deceptive practices when listing, soliciting or advertising their products. For event contracts tied to yes/no outcomes, platform operators are expected to use share or percentage pricing under the Commodity Exchange Act.

Compliance gap persists

The warning arrives against a backdrop of legal clashes over prediction-market regulation. The CFTC is currently engaged in court battles in Minnesota, Wisconsin and Michigan, even as many platforms have yet to fall in line. For Major League Baseball games scheduled on August 7, several markets continued to offer contracts on run totals, money lines and over/unders using conventional betting odds.

New York legal front

New York has emerged as a separate front in the regulatory fight. Novig filed a federal lawsuit against Attorney General Letitia James and Governor Kathy Hochul one day after launching its prediction-market platform, anticipating enforcement action from state regulators.

The state has already moved against Kalshi. On July 30, James and Hochul filed a lawsuit seeking forfeiture of all alleged illegal profits, consumer restitution and civil penalties equal to three times the gains earned through the alleged unlawful conduct. Kalshi is accused of disregarding New York gaming laws, operating without a license from the state Gaming Commission and thereby avoiding state licensing and tax requirements.

Governor Hochul said the state's gaming laws exist to protect consumers, prevent problem gambling and fund public services. "No company is above the law," she said.

Bottom line

Together, the CFTC letter and the state-level enforcement signal a widening effort to treat sports-event contracts as derivatives rather than bets. The message to operators is straightforward: if a product is a derivative, do not market it like a wager.