Arizona Fights Back Against Prediction Markets, Calls on CFTC for Action
Continued Resistance by Arizona Against Prediction Markets: Correspondence Sent to Commodity Futures Trading Commission
In a recent move, Arizona has reached out to the Commodity Futures Trading Commission (CFTC), urging it to intervene in the controversial realm of prediction markets. This escalation is a sign of the state's determination to tackle the growing concerns around these novel product offerings.
Prediction markets have garnered interest as they allow users to bet on a range of events, from sports and politics to legal happenings. The primary difference between these markets and traditional sportsbooks lies in the format, with prediction markets offering contracts tied to event outcomes rather than strictly classified betting. This classification positioning them under CFTC jurisdiction and enabling cross-state operations, unlike sportsbooks, bound by regional regulations.
The pushback from regulators and sports betting stakeholders portrays prediction markets as illegal betting, and the CFTC as a facilitator that adds credibility to the industry. Arizona, a state known for its vocal opposition to prediction markets, has added its voice to the chorus, urging the CFTC to act.
Arizona Takes a Stand Against Prediction Markets
In a series of letters dated June 2, Jackie Johnson, Director of the Arizona Department of Gaming (ADG), expressed concerns to the acting chair of the CFTC, Caroline Pham. Johnson strongly opposes the idea that states have been intricately designing regulatory frameworks, only to have Congress stealthily redefine gambling in the Commodities Exchange Act.
Johnson claims that prediction markets' products are essentially sports betting and that providers, including players like Kalshi and Robinhood, must obtain local licenses, pay all applicable fees, and taxes. Additionally, she argues that the CFTC's oversight fails to match the level of protection afforded by state regulators to consumers from potential harm.
Moreover, Johnson alleges that prediction markets undermine tribal operators, who have long relied on gaming compacts with state authorities, potentially affecting tribal communities negatively.
Ultimately, Johnson asks the CFTC to take action against prediction markets and acknowledge that their products equate to gambling.
Kalshi Stands Firm Amid Regulatory Pressure
Amidst the ongoing regulatory pressures across the US, Kalshi, one of the largest prediction markets, maintains its resolve. Regardless of state resistance, Kalshi argues that it operates under the jurisdiction of the CFTC, as such it would cease its services only if the commission instructs it to do so.
The ongoing feud between Arizona and the CFTC has significant implications for companies like Kalshi and Robinhood. If Arizona's stance gains traction, these companies may need to comply with state regulations or risk ceasing operations in affected states, potentially triggering a domino effect in the broader prediction market landscape.
The Arizona Department of Gaming (ADG) has written to the Commodity Futures Trading Commission (CFTC), asserting that prediction markets, such as those run by companies like Kalshi and Robinhood, are essentially forms of sports betting.
Jackie Johnson, Director of the ADG, has expressed concerns about the CFTC potentially redefining gambling in the Commodities Exchange Act, undermining state regulations in the process. She argues that prediction markets should be subject to local licensing, fees, and taxes, and that the CFTC's oversight does not provide an adequate level of consumer protection compared to state regulations.
Kalshi, one of the largest prediction market providers, has maintained its operations under the jurisdiction of the CFTC, claiming it would cease operations only if instructed to do so by the commission. The ongoing conflict between Arizona and the CFTC could lead to these companies needing to comply with state regulations in affected states, possibly triggering broader changes in the prediction market industry.
