Super Bowl Bets Under Fire: CFTC Probes Kalshi and Crypto.com

CFTC Scrutinizes Super Bowl-Related Contracts

Super Bowl-related activities are now catching the eye of regulators. The game is held every February on the second Sunday of the month.

As the event approaches, prediction market Kalshi and digital assets platform Crypto.com have become the focus of the US Commodity Futures Trading Commission (CFTC). The regulatory agency has initiated a review of the Super Bowl sports contracts offered by the companies.

This investigation aims to clarify if the trading contracts meet regulatory requirements and if they can be considered legal financial instruments or if they are illegal wagers.

As Bloomberg reports, the contracts continue to be available for trading. 

The CFTC will make a decision on whether to take enforcement actions after evaluating responses from Crypto.com and Kalshi.

A Crypto.com spokesperson told Bloomberg that the company is confident their products are legal and don’t go against the law.

At the same time, the company said they would work with the CFTC and continue to offer the contracts.

Crypto.com launched sports event trading across all 50 U.S. states at the end of 2024. The company’s CEO and co-founder, Kris Marszalek, explained that their trading contracts, a new type of financial product, represent a fundamentally new concept in sports.

On February 3, crypto trading platform Robinhood also rolled out Super Bowl trading contracts in partnership with Kalshi. However, the company had to halt the product after receiving a request from the CFTC.

Earlier, on January 27, CFTC Acting Chairman Caroline Pham announced the launch of a public roundtable series on market trends and issues, including affiliated entities in financial markets, digital assets, and conflicts of interest.

What Are Event Contracts Anyway? 

Event contracts are basically a way to bet on the outcome of things like sports games or elections. Instead of placing a traditional bet, you’re buying derivatives – financial contracts whose value is based on the outcome of something else.

Derivatives allow you to speculate on future outcomes without actually owning the underlying asset. So, you’re not investing in the event itself but rather in a contract that pays out based on the event’s result.

The value of the contract depends on factors like who wins the Super Bowl or which player scores first. They’re kind of like a mix between investing and gambling, which is why they’re catching people’s attention. But since they exist in a grey area, regulators are starting to keep a closer eye on them.

Rise of Prediction Platforms and Regulatory Concerns 

Prediction markets have surged in popularity. Platforms like Polymarket and Kalshi have transformed speculation into a full-blown marketplace, where people trade on the likelihood of real-world events just like they would with stocks or crypto.

These days, you can bet on almost anything – elections, the weather, whether a celebrity will get divorced, or even if the Federal Reserve will raise interest rates.

In 2024, Kalshi scored a major win, becoming the first fully regulated platform to offer legal election betting in the U.S. However, some products remain under scrutiny, as the recent CFTC probe has shown.

Meanwhile, the blockchain-based platform Polymarket recorded around $8 billion in trading volume in 2024 but has also faced mounting regulatory pressure. In November 2024, FBI officers searched the apartment of CEO Shayne Coplan, highlighting the heightened attention from authorities.

The ongoing investigations – taking various forms – make it clear that prediction markets are facing serious regulatory scrutiny as the number of bets skyrockets. 

The key question now is whether regulators will allow these platforms to thrive under clear legal frameworks or impose stricter limitations.