Regulatory
CFTC (Commodity Futures Trading Commission)
Commodity Futures Trading Commission
Definition
The United States federal agency that regulates derivatives markets, including futures, options, swaps and the exchanges on which they trade. It is the regulator American prediction market venues answer to.
Why it matters
The Commission matters to gambling because of who it is not. It is a federal financial regulator with no gambling remit, no responsible-gambling framework and no relationship with state gaming boards, and yet it registers the exchanges now offering contracts on sporting outcomes to American consumers. An operator regulated by the Commission is outside the licensing, taxation and player-protection regime that every state applies to sportsbooks.
Section 5c(c)(5)(C) of the Commodity Exchange Act gives the Commission authority to review event contracts involving gaming and to prohibit those contrary to the public interest. How actively it uses that power is the central policy question in the sector, and the answer has shifted with the composition of the Commission rather than with any change in the statute.
The Commission has also asserted emergency powers to direct registered exchanges to continue trading in the face of state enforcement, which has drawn criticism from state regulators and from lawyers who regard the instruction as inviting a licensee to disregard a court.
The bottom line
The CFTC is a derivatives regulator that has become, by consequence rather than design, the most important gambling regulator in the United States. Its appetite for reviewing sports event contracts determines the shape of the market.