CFTC Letter Stresses Accurate Pricing Rules for Event Contract Platforms

The Commodity Futures Trading Commission has reminded regulated entities of their obligations to avoid misleading consumers on event contract pricing. The Division of Market Oversight and the Market Participants Division issued the letter to entities involved in listing, soliciting or accepting these contracts. It stresses the duty to display clear and accurate information for derivatives products in CFTC-regulated markets.

The guidance calls for oversight of intermediary participants, affiliates and partners to ensure regulatory standards are met and product details are understood. Staff specifically flagged one common approach as problematic.

Warning Against American Odds Displays

Commission staff warned that displaying pricing information in the American odds format used by casino gambling bookmakers is likely to mislead market participants about the nature of the transaction. Such formats may deprive users of indicia of market depth and pricing impact. Entities should instead present details that clearly indicate when a product is an event contract on a CFTC-regulated exchange rather than a higher-margin, non-market-priced bookmaking product.

The divisions noted that displaying misleading pricing information in connection with any regulated product risks violating federal law prohibiting the use of manipulative devices.

Better Markets Policy Director Responds

According to reporting by G3 Newswire, Benjamin Schiffrin, Director of Securities Policy for Better Markets, said of the move: “The CFTC’s desire to help prediction markets avoid the inescapable conclusion that their event contracts on sporting events involve gambling knows no bounds. As we recently highlighted, prediction markets allow users to see the chances of a team winning a game in ‘American odds’—the same way as they appear in a sportsbook. The CFTC has now told prediction markets to disable this feature in a desperate attempt to dupe people into thinking event contracts on sporting events are not the gambling devices they so clearly are.”

Schiffrin added that prediction markets shifted from advertising bets on sports to claims of trading on sports, but “nobody trades on sports. People bet on sports, and that is what event contracts on sporting events let people do.” He concluded that the odds format cannot change the underlying fact that these involve gambling.

Reporting: G3 Newswire

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