CFTC reminds markets to display clear pricing information

Warning states that the American odds format used by casino gambling bookmakers is likely to mislead market participants

The Division of Market Oversight and the Market Participants Division of the Commodity Futures Trading Commission recently issued a letter to remind Commission-regulated entities involved in the listing, soliciting, or acceptance of event contracts of their responsibility not to mislead consumers, including the obligation to display clear and accurate pricing information for derivatives products. 

Registered entities and persons must uphold regulatory standards and foster clear understanding of the products offered within CFTC-regulated markets, including through the oversight of intermediary market participants, affiliates, and partners.

Commission staff warned that displaying pricing information in the “American” odds format used by casino gambling bookmakers is likely to mislead market participants about the nature of the transaction and may deprive users of access to indicia of market depth and pricing impact. 

Market participants should display information, including pricing information, that indicates to consumers when a product is an event contract on a CFTC-regulated exchange, rather than a higher-margin, non-market-priced bookmaking product. 

The divisions reminded regulated entities and persons that displaying misleading pricing information in connection with any regulated product risks violating federal law prohibiting the use of manipulative devices.

Benjamin Schiffrin, Director of Securities Policy for Better Markets, said of the move: “The CFTC’s desire to help prediction markets avoid the inescapable conclusion that their event contracts on sporting events involve gambling knows no bounds. As we recently highlighted, prediction markets allow users to see the chances of a team winning a game in ‘American odds’—the same way as they appear in a sportsbook. The CFTC has now told prediction markets to disable this feature in a desperate attempt to dupe people into thinking event contracts on sporting events are not the gambling devices they so clearly are.

“Prediction markets used to advertise themselves as offering the ability to bet on sports, but when they realized that made them sound like sportsbooks, they switched to saying they offer the ability to ‘trade’ on sports. This shouldn’t fool anyone, as nobody trades on sports. People bet on sports, and that is what event contracts on sporting events let people do.

“Now, the CFTC is telling prediction markets to use a similar sleight of hand, so it appears that event contracts on sporting events do not involve gambling. It is hard to believe that the CFTC would be helping prediction markets disguise the true nature of their event contracts and deceive American consumers. Regardless, the way in which the odds appear cannot change the fact that event contracts on sporting events involve gambling any more than saying event contracts on sporting events involve ‘trading’ rather than ‘betting’ on sports.

“Anyone who goes on prediction market platforms can see for themselves that their event contracts on sporting events involve sports betting. That is because betting on the Super Bowl, the Masters, or the World Cup is not trading a financial derivative but gambling. The CFTC must stop cheerleading for the prediction markets and recognize this reality.”