The Commodity Futures Trading Commission (CFTC) has issued a warning to prediction markets, including platforms like Kalshi and Polymarket, advising them to cease using American-style gambling odds. This directive, reportedly sent in letters to regulated entities, emphasizes that derivatives should be presented in nominal or percentage terms to accurately reflect market pricing, rather than in a format associated with casino gambling bookmakers. The CFTC specifically called out the use of plus or minus signs followed by a number representing potential winnings as a prohibited practice.
This move by the CFTC is part of a broader effort to assert its jurisdiction over the rapidly expanding prediction market industry. Chairman Michael Selig has maintained that the agency has exclusive authority over these markets, even engaging in legal battles with states that argue such platforms violate local gambling laws. The warning on American-style odds follows a study cited by the CFTC, which suggested that this presentation style leads to increased risk-taking in sports betting.
The letter from the CFTC reminds firms that they must comply with U.S. laws governing derivative trades and avoid deceptive practices when listing, soliciting, or advertising their products. While specific platforms prompted the warning were not identified, Kalshi has stated its intention to comply with the guidance. The issue highlights an ongoing dispute between federal regulators and states regarding the classification of event contracts as either financial derivatives or illegal gambling.
