Robinhood Pauses Sports Trading, CFTC Probes Sports Contracts

The CFTC paused sports trading on Robinhood and asked two prediction markets for additional compliance information

Robinhood Pauses Sports Trading, CFTC Probes Sports Contracts

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On the Tuesday before the Super Bowl, the CFTC asked Robinhood to pause trading on its sports event contracts. Robinhood listed contracts on which team would win the Super Bowl from prediction market exchange Kalshi the previous day. 

The same day that Kalshi’s sports contracts went live on Robinhood, the CFTC requested additional information about how Crypto.com and Kalshi’s sports contacts complied with CFTC regulations. 

Crypto.com began the finance industry’s push into sports contracts by listing title event winners the weekend before Christmas. Shortly before Trump’s inauguration, the CFTC ordered Crypto.com to pause its sports markets, and Crypto.com refused. Kalshi listed its own sports contracts on Jan. 23, the first Thursday of the new CFTC administration, following Crypto.com’s lead. 

As of this writing, Kalshi and Crypto.com still have their sports contracts live on their exchanges. Kalshi has not announced a change in the one-cent fee per contract it charges on its Super Bowl markets for market makers and takers alike. 

Resolving the gaming question

The only other regulated prediction market in sports is Sporttrade. Sporttrade offers prediction markets on sports wagers under state gambling law instead of federal finance law. So, Sporttrade is available in five states while Kalshi and Crypto.com have access to all 50 states, regardless of the state’s position on sports betting. 

Kalshi’s lawsuit against the CFTC could clarify the definition of “gaming” that the CFTC and the courts will recognize. The previous CFTC commissioners believed that election contracts constituted “gaming,” one of the prohibited types of election contracts. Kalshi disagreed, arguing that since the underlying event – the election – isn’t a game, then their contracts can’t be considered gaming. 

Oral arguments at the Appeals Court were on Jan. 17, and an opinion has yet to be issued. The definition of gaming could be used to guide CFTC policy in regard to sports contracts. 

CFTC Acting Chairman Caroline Pham stated in a May 2024 press release that while she agreed that election contracts were not “gaming,” she was also clear that gaming should be regulated by states instead of the CFTC. 

Sports contracts will test the claim that Crypto.com staked to sports events and how much the new CFTC is willing to let prediction markets experiment with new contracts.     

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