Fact-Checking Mike Selig’s Recent Comments About Prediction Markets
Credit: Hussein Altameemi/Pexels
Commodity Futures Trading Commission Chair Mike Selig recently sat down with Axios for an interview. Gaming America decided to put some of his comments under the fact-checking microscope.
Selig has been staunchly defending prediction markets and the right of the federal government to regulate them. He has even gone so far as to sue several states seeking to keep the prediction market operators out of their jurisdictions.
Predictably, Selig had a lot to say in support of prediction markets. But was it all truthful and forthcoming? Not exactly.
Selig: Prediction Markets and Sportsbooks are ‘Two Separate Things’
Technically, this is true. In reality, it’s not so clear.
The two models operate differently in the sense that sportsbooks take customer bets and have a financial interest in the customers’ losses. A prediction market, meanwhile, collects fees while matching parties on opposite sides of a binary yes/no contract.
In practice, some of the sportsbooks are operating as market makers on prediction markets — their own and others’ — while most of the other market makers are sophisticated operations backed by huge money and computer models. That means there’s a similar monolithic entity with unlimited resources on the opposite side of many, if not most, retail traders’ predictions.
This was also an odd statement from someone who claimed he was “not an expert on betting lines” when asked for the difference between a prediction market and sportsbook market covering the same subject matter. If Selig doesn’t know what a betting line looks like, how would he know that it’s different from a prediction market?
Verdict: True in theory, but not in practice.
Selig: People Aren’t Using Prediction Markets for ‘Entertainment’
Selig has been adamant about defending prediction markets as a product for financial speculation and “hedging.” That’s a word he uses often, saying that retail traders are “hedging against risks.”
That’s an important basis for prediction markets. They provided crop farmers, for example, the opportunity to hedge against poor weather that might result in a smaller-than-anticipated yield.
In reality, the vast majority of the volume at prediction markets is on sports. That figure is generally cited to be at least 80%.
Verdict: False. Most people are using prediction markets to bet on sports.
Selig: Sportsbooks Kick Winners Out, But Prediction Markets Don’t
Selig points out that winners aren’t booted from prediction markets like they are at conventional sportsbooks.
This is true, and probably one of the most cogent arguments in favor of prediction markets.
Sharp, winning players are generally not welcome at sportsbooks. They’ll often be limited to pennies if not banned outright. A handful of exceptions like Circa exist, but the reality is that winning players have a tough time finding action at traditional sportsbooks.
That’s unfair at best and predatory at worst, considering how much of sportsbook marketing amounts to the operators pumping out stories about huge winning parlays and customers happily cheering on their winning wagers.
Winners at prediction markets are free to keep trading as long as they can find someone who likes the other side or provides liquidity for it.
Verdict: True.
Selig: CFTC Will Be ‘Aggressive’ Against Insider Trading
Selig said that restrictions on insider trading under the CFTC are “nearly identical” to those of the Securities and Exchange Commission. He said that, in conjunction with the Department of Justice, the CFTC will be “an aggressive policeman.”
Considering insider trading is not exactly a non-issue in markets under SEC regulation, the efficacy of that statement is debatable.
What’s also debatable is just how much anyone cares about insider trading on prediction markets. The operators themselves and some prediction market bulls have not exactly shied away from the fact that insider trading is, in some ways, a feature rather than a bug. After all, how can a prediction market reflect the wisdom of a crowd if those in the crowd who know things don’t participate?
Insider trading has driven enough negative headlines that top operators Kalshi and Polymarket have pledged to crack down on it. Selig is also correct that the DOJ has gotten involved, charging a U.S. soldier in a high-profile case.
These are steps in the right direction, but they come in an environment in which insiders have been printing money for months.
Verdict: This has not been true, but perhaps things are changing.
Players trust our reporting due to our commitment to unbiased and professional evaluations of the iGaming sector. We track hundreds of platforms and industry updates daily to ensure our news feed and leaderboards reflect the most recent market shifts. With nearly two decades of experience within iGaming, our team provides a wealth of expert knowledge. This long-standing expertise enables us to deliver thorough, reliable news and guidance to our readers.
Latest News
