The US Commodity Futures Trading Commission (CFTC) has initiated an inquiry into the sports betting markets provided by prominent crypto exchange Crypto.com and Kalshi, a major player in the prediction market sector.

The investigation is centered on their adherence to derivatives regulations. Both platforms recently implemented options for users to engage in trading predictions related to Super Bowl outcomes.

🚨🇺🇸 JUST IN: The US CFTC is reportedly investigating Super Bowl markets offered by Crypto. com and Kalshi, asking them how they comply with derivatives rules. — Zeno (@marketsviewai) February 4, 2025

Crypto.com and Kalshi enable users to make predictions on outcomes of significant games, like the upcoming Super Bowl, through financial contracts. Although companies currently have the ability to “self-certify” their financial products, they must provide extra information upon the CFTC’s request.

According to a Bloomberg report dated February 3, 2025, a spokesperson from the CFTC stated, “We are continuing to review the contracts in accordance with our regulations.”

Exploring a New Trend in Crypto: Betting on Sporting Events

Crypto.com has launched sports-related contracts on its derivatives exchange based in Chicago. These contracts allow users to forecast outcomes for National Football League (NFL) and college football matches. While the platform does not explicitly mention games in customer-facing materials, team names and outcomes are visible in its app.

The contracts were submitted to the CFTC for review just before Christmas 2024, leaving them limited time to evaluate compliance with federal regulations. A CFTC spokesperson confirmed that the agency is still actively reviewing these contracts for legality.

Similarly, Kalshi is also under scrutiny from the CFTC. The platform recently launched a market titled “Kansas City vs Philadelphia Football” on January 24, 2025, which has seen trading volume exceed $2.5 million.

Additionally, Kalshi has introduced unique markets allowing users to wager on which companies will air commercials during the Super Bowl, having already recorded nearly $1.5 million in such bets.

CFTC’s Limited Authority and Implications

Interestingly, the CFTC does not possess immediate power to suspend trading of these contracts prior to completing its review. This implies that Crypto.com and Kalshi can continue offering their Super Bowl-related markets up to at least February 9, 2025, when this year’s Super Bowl will take place.

Recently, CFTC acting chair Caroline Pham announced a series of public roundtable discussions addressing market concerns, specifically those associated with digital assets.

In general, prediction markets offer platforms for users to place bets on various outcomes, ranging from political elections to economic indicators. These platforms consolidate individual forecasts to derive a market-driven probability, which can provide a more dynamic and potentially accurate estimate than traditional polling methods.