When financial technology upstart Kalshi facilitated more than $200 million worth of U.S. presidential election futures market trades last October and November despite federal agency opposition, U.S. sportsbook operators took notice but didn’t feel compelled to act.
Election futures trading, where people buy contracts that pay out if their chosen candidate wins, had never been in the U.S. betting company arsenal because those firms abide by state regulations that forbid such wagers. So, Kalshi did not pose a direct competitive hazard.
Since then, however, Kalshi, Crypto.com and Robinhood have crept much closer to the core sportsbook business by applying the event futures trading concept—also known as a prediction market—to sports. They now let people place money on the results of games. And the whopper: No state-by-state license approval, regulation or special taxation is required.
Crypto.com launched its sports prediction market in December, causing a collective shock to the system in the sports betting sector, according to recent conversations with people familiar with industry dealings, including executives who spoke on the condition of anonymity because the details are private.
Kalshi and Robinhood have joined Crypto.com to provide contracts regarding the Super Bowl outcome, though Robinhood went offline Tuesday amid regulatory review.
The 2025 Super Bowl will be the first where any fan in the U.S. over the age of 18 can easily wager through the futures market. The trades are overseen by the federal Commodity Futures Trading Commission (CFTC) rather than states, largely because they have not been legally classified as gambling. Sportsbook operators view sports futures as a genuine long-term business threat if not curtailed, sources said.
A basic technical difference between event futures trading and sports betting is that event futures trading features only two possible choices priced solely by the actions of other investors, while betting pits users against the book and its built-in edge. Behaviorally, they are each a form of gambling, executive director of the National Council on Problem Gambling Keith Whyte said in an interview.
For a sense of industry scope and what is at stake, U.S. citizens will bet more than $1 billion on the Super Bowl using legal sportsbooks in 2025, according to an American Gaming Association report published Feb. 4. Futures trading platforms will only take small crumbs for now. Kalshi has hosted about $3 million in Super Bowl event contract sales as of Wednesday morning, less than 1% of what FanDuel and DraftKings combined to take in bets surrounding last year’s big game.
But emboldened by a lack of regulation, they may continue their advances, helped by large existing user bases in their apps secured through other financial products such as stocks and cryptocurrencies. Robinhood, for example, has about 24 million people in the U.S. with money in an account, and it reported 10.9 million monthly active users at the end of 2023 before it stopped sharing that metric each quarter. In comparison, FanDuel reported 3.2 million average monthly U.S. users last fall, and DraftKings engaged about 3.1 million.
“It’s the new kids on the block,” Chris Grove, a partner at research and consulting firm Eilers & Krejcik Gaming, said in an interview. “We thought we knew what the competitive landscape from online gambling in the U.S. looked like. Think again.”
On the Agenda
Because the CFTC oversees other futures trades, including those related to oil and grain prices that have existed for decades, it is the de facto federal agency for both election and sports event contracts. This is not a job its leaders anticipated when the Commodity Exchange Act was last updated by Congress in 2010, a former high-ranking official at the agency said. The CFTC is now moving to catch up and on Wednesday confirmed a roundtable discussion this spring to help establish policy on sports-related contracts.
“Prediction markets are an important new frontier in harnessing the power of markets to assess sentiment to determine probabilities that can bring truth to the Information Age,” acting CFTC chair Caroline Pham said in a statement. “The CFTC must break with its past hostility to innovation and take a forward-looking approach to the possibilities of the future.” Pham is a former CFTC commissioner appointed by President Donald Trump on inauguration day to replace Rostin Behnam.
Before the past few months, sportsbook operators had little reason to know much about the CFTC. Now they are dialed in.
For several weeks after Crypto.com’s sports trading launch, companies in the sports betting sector took different stances internally on what to do next, resulting in public silence as a possible competitor advertised its new product. Betting executives, legal counsel and state regulators stayed in close contact at market-leading companies as all sides gathered information about possible approaches to futures trading.
This week, there is far more unity among sportsbook operators than in mid-January, a source said. That togetherness, as well as more time to assess an unfamiliar field, contributed to the American Gaming Association releasing its first public statement condemning sports futures event trading Tuesday afternoon.
“The American Gaming Association is concerned with current efforts by certain trading platforms and digital exchanges to launch national sports event contracts that appear to circumvent state regulatory frameworks,” the group said in an emailed statement.
During Joe Biden’s presidential administration, the CFTC took legal action against the introduction of election-related futures, which in hindsight may have been the calm before a bigger storm. CFTC v. Kalshi, the long-running election futures case being appealed by the CFTC at the D.C. Circuit Court of Appeals, went through oral arguments last month. The accusation from previous CFTC leadership that Kalshi is effectively running a gambling platform could have ramifications for sports futures, too.
Following Trump’s election as president, a new-look CFTC seemingly has little appetite to keep fighting Kalshi in court, though attorney Greg Brower of Brownstein Hyatt Farber Schreck, an expert on gaming issues and former FBI executive, said the agency will likely avoid the “unusual” move of dropping the active appeal case before it runs its course.
“The more likely scenario would be that once the circuit court makes a decision, that even if the CFTC in effect loses, that the new leadership team won’t seek review,” Brower said in an interview. “Of course, from the Court of Appeals, the only place to go is with a cert petition to the Supreme Court of the United States, which are very difficult to get granted anyways.”
There are some signs, albeit inconclusive, that a reshaped CFTC under President Trump will enable sports futures trading. Trump’s son, Donald Trump Jr., became an advisor to Kalshi in January. Days later, Kalshi announced it would expand its sports catalogue.
Pham has not offered a clear guiding outlook for the agency regarding sports futures since taking over. She did, however, write a dissenting opinion in May 2024 claiming the CFTC should regulate Kalshi’s election trades rather than fight the company entirely. Insiders closely following the case view the handling of the election trades as correlated to how she might act toward sports deals.
Just before Pham’s arrival, the CFTC under prior guard sent a Jan. 14 memo to the North American Derivatives Exchange Inc. (Nadex) telling it to suspend Crypto.com’s Super Bowl listings (Crypto.com owns Nadex and uses its infrastructure to facilitate futures trades).
Crypto.com continued to sell its sports futures contracts anyway and criticized the CFTC for issuing the takedown request before outgoing leadership handed over to Pham. Crypto.com did not respond to a request for comment about its interactions with government officials. Kalshi declined a request for comment.
So far, there is no signal Crypto.com or similar outfits will be stopped by the CFTC; Pham released a statement last week saying the agency would begin an extended process conversing with stakeholders before reaching any conclusion, and Bloomberg reported Monday that the CFTC does not expect a vote on the matter until April at the earliest. On Tuesday, Bloomberg wrote that Pham will eventually be replaced by another Trump-appointed nominee, further complicating the agency’s plan of action.
Betting industry leaders are optimistic they will have a representative present at Pham’s planned CFTC deliberations surrounding sports event futures trading, a source said, though no formal invite has been received yet.
The CFTC recently reached out to Crypto.com and Kalshi asking for more information about their sports contracts and requested Robinhood take its sports futures down Tuesday, just one day after listing them. Robinhood has obliged under the expectation it can put sports contracts back online within the next 11 months.
“We will continue to collaborate with the CFTC as we work to roll out a more comprehensive event contracts platform later this year,” Robinhood wrote in a statement.
On one hand, the CFTC’s request to Robinhood offered a small relief to sportsbook operators, according to a person familiar with the situation. Yet around the same time as Robinhood’s pullback, the CFTC suggested in a separate announcement it would take a more permissive stance toward marketplaces moving forward, pledging to “end the practice of regulation by enforcement” and instead focus on individual fraud cases.
Without the capacity for immediate enforcement action against Crypto.com and other financial technology platforms, there would not be a mandate for companies to halt their sports trades.
“The [American Gaming Association] further urges these companies to cease offering sports event contracts during the CFTC’s review period,” the lobbying group wrote in an email.
Crypto.com is running with its perceived freedom, last week releasing more sports contracts, including for the NBA.
The company is hoping its brand awareness with sports fans—thanks to sponsorships tied to NBA teams, the UFC, F1 and other leagues and events—can make it the go-to destination for companies or individuals putting money down. It also offers numerous derivative markets for cryptocurrencies and has not been shy about advertising in the past, linking up with LeBron James in 2022.
The CFTC did not respond to a request for comment on its futures trading endgame under the new administration.
Stopping the Futures Beyond the CFTC
If the CFTC does not force sports futures trading offerings out of its jurisdiction or shut them down, sports betting companies have additional potential levers to pull.
They generally avoid attacking big-picture issues alone, instead waiting to assemble the full firepower of their caucus and related groups. A source said there has been progress on this front over the past two weeks.
The most promising non-CFTC action in the eyes of sportsbook operators is likely state attorneys general taking legal action against financial technology platforms over alleged violations of their gambling laws, a source said, by sending cease-and-desist letters or ultimately filing lawsuits. Sports betting companies already keep contact with state regulators, and the industry is not short on resources.
According to Open Secrets, casino and gambling advocates spent more than $60 million on 2024 political campaigns and another $29 million on lobbying efforts.
At the federal level, Congress could try to pass federal legislation that explicitly takes sports futures contracts out of the CFTC’s purview. This might be done as an amendment to the existing Commodity Exchange Act, which says the CFTC should not permit “gaming” activity but may need to be clarified to also ban “gambling” after a courtroom tussle with Kalshi over semantics.
Help for the sportsbooks from there seems unlikely, though, as a Republican-led Congress may prevent a Commodity Exchange Act amendment because of the Trump family’s new association with Kalshi and concerns it could curtail more of the futures trading industry than intended. Plus, a sportsbook industry source said federal intervention could cause negative business outcomes for their own caucus if it encourages the passage of stringent national guidelines resembling those in the SAFE Bet Act.
In the event Crypto.com, Robinhood and Kalshi are eventually forced to comply with state-by-state betting regulations, thus removing them from action in California and Texas where gambling is illegal outside tribal land, it would erode one of the main potential advantages they have over the sports betting incumbents. It would deal them a blow in states where betting is legal, too, as those places tax online operators up to 51% of gross gaming revenue and institute player safety requirements.
Multiple people familiar with sports betting company thinking said the difference in rules faced by sportsbooks and futures trading platforms are the most aggravating aspect of recent developments, while the timing of sports prediction market launches—just before the most bet-on event in America and amid a change in political power—has further inflamed the conflict.
“To allow a company to effectively get into the sports betting business, but without going through all the same licensure and regulatory realities that the incumbent companies have gone through, that’s a concern for obvious reasons,” Brower said.
(This story has been updated in the 11th and 12th paragraphs with information from a statement the CFTC released on Wednesday.)