Federal regulators are looking into the possibility of investigating the legality of futures contracts on Crypto.com, which allow investors to predict the outcome of major football games, including the Super Bowl.
The move comes as the Commodity Futures Trading Commission (CFTC) voted on a proposal to require a review of these contracts within 90 days.
The regulator’s review could extend past Super Bowl LIX on February 9. As reported by Bloombergonce the overall review is complete, could lead to a ban on the exchange’s futures products.
The crux of the matter is whether these contracts, available on Crypto.com’s Chicago-based derivatives exchange, violate the rules of the game.
December 23, Crypto.com announced the launch of sports event trading products. This product allows users to predict game results.
“This is a unique financial product that allows users to trade their predictions on the outcome of a sporting event. This is a completely new concept for sports, and we are excited to be the first US-licensed platform to offer this product to users,” said Kris Marszalek, co-founder and CEO of Crypto .com.
Crypto.com informed the CFTC of its plans to launch these contracts from December 19, just days before the holiday season. Therefore, the agency does not have enough time to review them before they launch.
Regardless, Crypto.com went ahead with its launch on December 23. The exchange wanted to avoid the risk of missing out on trading opportunities before the Super Bowl.
The rise of these event-based contracts is causing a lot of concern. The CFTC, which regulates the swaps and futures markets, has always been cautious about contracts tied to sports and elections.
“The CFTC has always had a fairly conservative view of what counts as an ‘event.’ The ‘cleanest’ event in sport is the result of a match. There needs to be a fundamental change in CFTC policy before you can create, for example, SGPs through these types of markets. Notably, the new administration appears to be crypto-friendly and believes in the intrinsic value of prediction markets. So a radical change from the CFTC is not only possible, but likely,” betting expert Chris Grove write on X (formerly Twitter).
Crypto.com’s contracts are linked to college football and NFL results. While they don’t specifically mention matches, they do allow users to bet on events like the Super Bowl.
The CFTC’s review will focus on whether these contracts could be considered illegal gambling activities. Notably, these contracts are priced at $100 each, allowing individual traders to own up to 2,500 contracts.
The CFTC has encountered similar situations with prediction markets before. Kalshi even banned Kalshi from registering and liquidating political event contracts to ensure legality.