Native American tribes have asked the Commodity Futures Trading Commission and the Securities and Exchange Commission not to bring sports-related prediction-market contracts under swap rules. They said that doing so would pull business away from tribal gaming, interfere with a vital source of funding and create a regulatory path that bypasses the framework for gaming on tribal lands.
As reported in July, gaming groups told Congress that sports event contracts resemble sportsbooks and are cutting into the legal betting system. The latest comments extend that dispute to the agencies now considering how to classify these products under federal market law.
According to the CFTC, it issued a notice of proposed rulemaking on June 10 for amendments to Regulation 40.11 and the addition of Appendix F to part 40. The proposal would set up a structured review of event contracts involving activities listed in Section 5c©(5)(C) of the Commodity Exchange Act, including gaming, and would ask whether such contracts are contrary to the public interest. The commission also said it had seen growth in event contracts listed for trading by CFTC-registered entities, including those tied to sporting events.
The SEC and CFTC separately issued a joint request for comment on whether the definition of a swap and related terms should be further refined. The agencies said the exercise is meant to draw clearer regulatory lines around innovative products that may implicate both regulators’ interests, and market participants have already raised questions about whether certain event contracts are swaps, security-based swaps, mixed swaps or fall within statutory exclusions.
Other market players are weighing in as well. Law360 reported that exchanges including CME Group and Nasdaq were among the commenters. In its filing, CME said the CFTC’s special rule allows it to prohibit event contracts it finds contrary to the public interest, but argued that basic listing problems should be resolved first. CME also said uneven or absent enforcement has helped produce more than 8,000 event contracts and that a new prospective rule would not erase past problems.
The tribes’ argument is that treating sports-betting-style contracts as swaps would sidestep the existing tribal gaming framework and threaten a key revenue stream. They said the proposal would violate the Indian Gaming Regulatory Act.
