Sporttrade requests CFTC approval for nationwide event contracts rollout
Philadelphia-based sports betting exchange urges federal agency to grant US expansion after claiming Kalshi, Crypto.com, and Robinhood could gain an “insurmountable market advantage”
Sporttrade CEO Alexander Kane has called on the Commodity Futures Trading Commission (CFTC) to allow the rollout of its event contracts nationwide.
The request, submitted on April 25, comes in response to the rise in popularity of sports event contracts, a product similar to the one Sporttrade offers, rolled out by prediction markets platforms including Kalshi, Crypto.com, and Robinhood.
Kane explained that the lack of legal clarity surrounding sports event contracts is “disproportionately” harming the company.
Sporttrade operates as a betting exchange with the aim of providing its users with a stock trading-style feel for sports betting and is currently live in Virginia, Arizona, Colorado, Iowa, and New Jersey.
However, Sporttrade is unable to pool liquidity in those markets, and instead has offered sports betting in each state. Should the CFTC approve its request, it would be able comingle liquidity across the US.
The firm is regulated at state level, meaning it must adhere to the rules of the respective regulator in each of the five states it is live in, as well as submit an application and pay a license fee should it wish to expand into new US jurisdictions.
In contrast, the aforementioned prediction markets trio have been able to rollout sports event contracts to users aged 18 and over in all 50 US states in one fell swoop.
Kalshi, the most prominent prediction markets platform, has argued that because it is regulated at federal level by the CFTC, state-level authorities do not possess the power to halt its offering, despite mounting concerns that the product is effectively unauthorized sports betting.
In turn, Sporttrade CEO Kane has written to the CFTC, noting that Kalshi’s presence across every state poses a significant threat to the company’s market share and that it could suffer “irreperable harm” unless also granted nationwide access.
Kane noted that while Sporttrade is prevented from a nationwide offering, the likes of Kalshi, Crypto.com, and Robinhood will gain an “insurmountable market advantage” over his company, despite its willingness to offer the same product in a “regulated and compliant manner.”
He wrote: “We would ask the CFTC to apply discretion given the extraordinary unique circumstances to provide no action relief towards Sporttrade, given our track record of operating a compliant event contract exchange under the regulatory scrutiny of multiple state gaming regulatory bodies.
“We would expect that such relief would require evidence that Sporttrade can satisfy all CFTC reporting requirements and core principles, which is something we are prepared to do.”
Kane also highlighted how no other company could request such relief, given Sporttrade is the only exchange regulated on a state-by-state basis.
The letter concluded with Kane outlining the firm’s plan if granted the permission for a nationwide rollout by the CFTC.
“At the time of writing, Sporttrade is preparing a formal no-action relief request that in effect will demonstrate that Sporttrade can satisfy all core principles and reporting requirements to list a small, select set of sports contracts that we can demonstrate are within the public interest,” he added.
After citing previous examples of the CFTC granting relief for exchange platforms to accept event contracts without formal federal registration, he insisted this approach would promote an “open and fair” marketplace for sports event contracts.
The Sporttrade CEO has previously spoken to EGR North America regarding his frustrations over the nationwide reach of prediction markets, while his firm is hamstrung by intrastate rules.
“If we decide this is allowed, then there needs to be a very level playing field so that many participants can offer the same thing and compete on price and experience,” he said to EGR NA in February.
“Otherwise, we risk having a small pool of one or two that are operating because they’ve decided to ignore everything that everyone else has seen for decades and have a large first-mover advantage.”
Kalshi is currently embroiled in legal battles with several state regulators after filing lawsuits against authorities in Nevada, New Jersey, and Maryland in response to cease-and-desist orders.