CFTC Warning on American Odds Puts Prediction Market Pricing Under Scrutiny
The Commodity Futures Trading Commission (CFTC) issued a statement warning companies and individuals from displaying pricing information in “American odds” format, commonly used by casinos and the best sports betting sites to offer gambling products.
In a statement issued on Aug. 7, the CFTC’s Division of Market Oversight and Market Participants Division warned registered entities and persons from presenting the pricing of event-contract derivatives in sportsbook-style American odds, saying it could confuse consumers about the product they are purchasing. The warning was followed by a staff letter detailing the procedure.
Regulators said they were concerned about reports that some regulated event-contract products used by prediction market apps were being marketed using the "plus-and-minus" format tied to casino bookmaking rather than nominal or percentage-based pricing that reflects market activity. The CFTC noted that derivative prices form through competitive bidding among traders, with order books typically showing real-time bids and offers.
The letter cites Section 9 of the Commodity Exchange Act and Commission Regulation 180.1, which bars intentionally or recklessly making misleading statements or omitting material facts connected to regulated products. Entities were asked to review pricing displays and marketing materials, including those used by partners and affiliates, and confirm receipt of the letter by Aug. 31.
The warning builds on a March advisory in which the CFTC described exchanges as front-line regulators responsible for market integrity and contract design. It also follows a July push from 44 state attorneys general urging the commission to withdraw a separate proposed rule, arguing the agency lacks congressional authority to regulate sports wagering through federal derivatives law.
CFTC proposal would define "Gaming" for event contracts
That jurisdictional fight ties into a broader rulemaking effort the CFTC introduced last month. In June, the commission proposed amendments to its regulations governing event contracts, including a new Appendix F establishing a framework for deciding when a contract touches on activities barred under the Commodity Exchange Act's Special Rule.
Among these are gaming, unlawful conduct, terrorism, assassination and war.
Under the proposal, gaming would be formally defined as any activity that participants typically pursue for recreation or to entertain others, that follows a set of rules and that produces measurable outcomes depending on luck, skill or athletic ability. The commission would apply this definition through a three-step inquiry to determine whether a contract qualifies as an event contract, whether it involves gaming or another listed activity and whether it ultimately runs contrary to the public interest.
For sports-related contracts specifically, the proposal lists factors that weigh against a public-interest violation, such as settlement tied to a game's final outcome using verifiable league data. It also covers factors that weigh toward one, including contracts tied to a single play, an injury or a referee's individual call.
The rule also flags contracts based on pre-collegiate events involving minors as a particular concern. Public comment on the proposal remains open as the CFTC continues shaping how gaming-related contracts will be evaluated going forward.
