To my mind, few things make less sense than the regulatory status of the prediction markets.  A very new phenomenon, prediction contracts first were regulated by various forms of State regulation, toyed with by the SEC and then came under the self-proclaimed jurisdiction of the US Commodity Futures Trading Commission, a jump in logic which I report without comment.  Of course now the States and the Feds are fighting and suing over who’s in charge here.

Let me predict, with admittedly no special information or insight but noting the current appetite for Federal regulation loosely applied in all instances, that the Feds are going to end up as the regulator to be dealt with.  In any event, on June10 the Feds sent to the White House a 250 page proposal for regulation of the prediction market, and also released that proposal to the public.

The proposal itself is very fluid, asserting CFTC control and stating that it “preliminarily believes” that markets hinging on outcomes of professional and collegiate sports events are permissible under federal law, except for contracts that settle on player injury or outcome of officiant’s calls or involve Little League games.  It is suggested that contracts need to demonstrate they are free of manipulation and are resolved based on verifiable criteria; MLB, NBA and PGA all responded that settlement of contracts should reflect league data.  There is express request for regulatory suggestions that preserve for Fintech firms the ability to be creative in enhancing access to these derivatives, and in integrating digital asset technology.

Those who decry the professionalization and commercialization of sports, particularly at the collegiate level, marked by compensation of athletes by Universities and the movement of better athletes among different school programs to prime them for millionaire contracts in the pros, no doubt will decry that added commercialization.  Those who fear manipulation by athletes at all levels for purposes of obtaining returns on bets similarly will be unhappy.  But the combination of public appetite and Federal bias in  favor of “free markets” in every area will doubtless create a permanent betting universe easily accessed by most would-be players.  Add the emergence of prediction markets to the already constant harping of sports betting sites on television, often during televised sporting events, and the free market will brings us a host of optimistic losers.

And note: prediction contracts are not all about sports; you will be able to open a contract on just about anything– for example how many thousands of people will read this post in the next few days…..