PGCB Executive Chair expresses prediction market concerns

The Executive Director of the Pennsylvania Gaming Control Board (PGCB), Kevin F. O’Toole, has submitted a letter to the state’s Senators and Congress outlining serious concerns around prediction markets.  

O’Toole expresses as part of his letter that the state’s pre-existing and delicately poised sports wagering regulatory framework is significantly threatened by prediction markets, specifically sports events contracts.  

Indeed, the PGCB Executive Chair goes on to outline the alarming fact of a lack of consumer protection infrastructure within the prediction market sector – specifically pointing out that, since the markets are self-certified, they are often not subject to review at federal level by the Commodity Futures Trading Commission (CFTC). Now, O’Toole has formally submitted his concerns to Pennsylvania’s two US Senators and 17 Congressional members, urging them to request further consideration by the CFTC as to the aforementioned issues – alleging that sports events futures are purporting under a ‘facade of federal regulation.’ 

Detailed as part of the letter, O’Toole writes, “Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law. These markets effectively create a backdoor to legalized sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight. 

“The jurisdictional clash carries a significant risk of resulting in inconsistent and inadequate regulation. The CFTC’s framework is designed for derivatives markets often involving sophisticated institutional participants. In contrast, state gaming regulators prioritize consumer protection for the public, implementing detailed measures for responsible gaming, age verification, and problem gambling prevention.” 

“With all due respect to the CFTC, it would take years for them to create the regulatory system and oversight that state gaming authorities have in place, which would also create a redundancy for a system that already exists and works exceptionally well. Even worse, the parallel tracks risk confusing patrons who engage in these markets by utilizing the veneer of a highly regulated market when, in reality, their markets are more akin to the ‘wild west’”. 

Good to know: Following the abolishment of PASPA, Pennsylvania became one of the first states to regulate sports betting in November 2018 

Additional concerns from across the US wagering industry have been submitted to the CFTC over the course of the year regarding prediction markets and, more specifically, sports events futures. In Q2, similar concerns from both the Michigan Gaming Control Board and the Chair of the NBA, Adam Silver, were formally submitted to the commission.  

Nevertheless, the CFTC has continued to provide no legal or regulatory comment or direction pertaining to the prediction market sector or sports events futures contracts – leaving regulators un-assisted and potentially open to legal action for removing prediction market operators from a given state market.  

This week, Kalshi officially sued another state regulator in the Ohio Casino Control Commission for exactly that – as the operator alleges the regulatory body overstepped its jurisdiction in the removal of the Kalshi platform from the Ohio marketplace. Elsewhere this week, arguably the world’s largest prediction platform, Polymarket, received a $2bn strategic investment ahead of its imminent re-entry into the US.  

Will Underwood

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