Fantasy Sports Platform Sleeper Alleges CFTC Is Breaking the Law
Fantasy sports platform Sleeper is launching a legal battle against the Commodity Futures Trading Commission (CFTC).
It accuses the regulator of violating federal law by blocking its attempt to enter the prediction market industry. Milbank partner Joshua Sterling, representing Sleeper Markets LLC, sent a letter to the Office of the Inspector General (OIG) for both the CFTC and the US Department of the Treasury, alleging the CFTC improperly denied the company's application to register as a futures commission merchant (FCM) with the National Futures Association (NFA).
Sterling argued the denial amounted to an "illegal delay" and urged both OIG offices to investigate the application process.
The letter argues that Sleeper is entitled under the Commodity Exchange Act to register as an FCM, a designation that would allow it to partner with a designated contract market (DCM) to offer sports event contracts.
Sterling added that the NFA was prepared to approve Sleeper's application in August before the CFTC directed the association to withhold it without providing an explanation. He further claimed the agency has "no discretion to delay approval of materially complete FCM applications."
Sterling's letter followed a lack of response from the CFTC after an earlier request to Acting Chairman Caroline Pham. He accused the commission of "abuse, mismanagement, and a waste" of regulatory authority, adding that FCMs have no role in exchange operations and that blocking Sleeper's application hinders competition and innovation.
The OIGs of both the Treasury and CFTC are now reviewing the allegations, which could lead to administrative or legal action.
Polymarket advances with regulatory support
While Sleeper faces regulatory obstacles, rival prediction market operator Polymarket appears set to move forward under U.S. law after a favorable CFTC development. It's moving closer to operating legally in the United States following a recent no-action letter by the Commodity Futures Trading Commission (CFTC).
“Polymarket has been given the green light to go live in the USA by the @CFTC,” Shayne Coplan, Polymarket CEO, said in a post on X. “Credit to the Commission and Staff for their impressive work. This process has been accomplished in record timing.”
Earlier this year, Polymarket acquired QCEX in a deal valued at $112 million, which provided it with direct access to a fully licensed exchange and clearing system in the US. The CFTC confirmed that it will not pursue enforcement action against QCX or its participants for failing to meet swap-related reporting obligations, as long as the activity remains within the limits specified in the relief.
The shift comes during a period of increasing capital flowing into prediction markets. Kalshi recently secured $185 million in funding, pushing its valuation to $2 billion. At the same time, Polymarket has also attracted backing, including investment from 1789 Capital, a firm with ties to Donald Trump Jr.
