CFTC will verify the legality of sports betting on the crypto exchange Crypto. com

What’s new? The US Commodity Futures Trading Commission (CFTC) is investigating sports event contracts offered by centralized crypto exchange (CEX) Crypto. com and prediction marketplace Kalshi. com. The regulator has sent letters to both companies demanding clarification on how their products align with rules regarding derivatives trading.

Bloomberg’s material

What else is known? On December 23, 2024, Crypto. com launched a derivatives platform that allows users to bet on the outcome of Super Bowl LIX, a soccer game between the Kansas City Chiefs and Philadelphia Eagles that will take place on February 9, 2025.

Crypto. com co-founder and CEO Kris Marszalek said that the Sports Events Trading product has been regulated since its launch. For instance, the exchange notified the CFTC back on December 19 that it would begin trading contracts on December 23.

However, according to Bloomberg, the CFTC did not have time to review the notice before the Christmas holidays amid the risk of a government shutdown.

Marszalek clarified that the platform intends to engage with the CFTC to clarify the situation and will not suspend its sports betting offerings at this time:

“We firmly believe in the legality of our events contracts and believe the CFTC is the appropriate regulator to bring federally regulated market integrity, manipulation controls and product availability in all 50 states.”

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The CFTC, now headed by Caroline Pham, cannot immediately stop trading in sports contracts on Crypto. com and Kalshi because the investigation must last at least 90 days and the Super Bowl will be over by then. However, the CFTC could ban such contracts after the event.

News of the investigation follows a January 27 announcement by the CFTC’s new leadership that it will scrutinize the derivatives market.

The law authorizes the CFTC to request additional information from firms that “self-certify” their financial products to determine whether those products are susceptible to manipulation and comply with derivatives regulation. The CFTC then decides whether any enforcement action, such as filing lawsuits, is necessary.

As for Kalshi, the platform gained popularity before the presidential election last year. The CFTC argued that betting on the outcome of the election diminished its integrity and tried to shut down the product through the courts. The court denied the CFTC’s motion, but the regulator is pushing for a reconsideration of the decision.

Also earlier this week, Robinhood, a broker that supports cryptocurrency trading, announced a partnership with Kalshi and allowed some customers to bet on the Super Bowl. Robinhood’s subsidiary platform Robinhood Derivatives also previously allowed betting on the outcome of the US presidential election.