Prediction markets face pressure from CFTC, Ohio and Canada
A week of litigation masked parallel regulatory moves: the CFTC curbed micro-event contracts, Ohio escalated its stand-off with sports event contract firms, and IG Group outlined UK plans for Underdog.
Prediction markets operators spent much of the past week in court, with Novig and Crypto.com separately suing Missouri, Polymarket suing Ohio, and Utah suing Kalshi alongside its affiliates and two Susquehanna trading entities. Michigan's attorney general also accused Kalshi of breaching a preliminary injunction by continuing to advertise in the state.
But the litigation has not been the only front. Regulators on both sides of the border took fresh action against the sector this week, according to SBC Americas.
The Commodity Futures Trading Commission published the final text of its proposed rule on sports event contracts, opening it for public comment. Front Office Sports reported that a CFTC spokesperson said the commission had separately written to Novig and ProphetX asking the two registered exchanges to hold off listing certain sports prediction markets.
The CFTC's concern centres on so-called micro event contracts, including markets on which player scores first in a basketball game. Novig and ProphetX had self-certified those contracts without yet listing them, and the commission asked both firms to justify how the products meet the Commodity Exchange Act's definition of a swap.
A CFTC spokesperson said any contract listed on a CFTC-regulated exchange has to comply with the Commodity Exchange Act, framing the move against micro trades as consistent with chairman Michael Selig's push to guard against fraud and manipulation. The regulator's broader rulemaking also flags doubts about whether in-game prop-style markets serve the public interest or meet statutory requirements, citing integrity risk.
Similar unease exists in licensed sports betting, where the NBA has already tightened what player props and micro markets its sportsbook partners can offer.
In Ohio, the Ohio Casino Control Commission intensified a campaign that has run for roughly 18 months and already included cease-and-desist notices, litigation, and a proposed $5m fine against Kalshi for taking what the OCCC views as unlicensed sports bets. Having warned licensees as far back as August 2025 that facilitating event contract trading anywhere in the country could put their Ohio licences at risk, the commission went further this week.
As The Event Horizon first reported, the OCCC wrote to every sports wagering and fantasy contest licensee and applicant, telling them that supporting sports event contracts within Ohio puts their own authorisation in jeopardy. The letter was not limited to sportsbooks; it also reached licensed service providers such as market-makers, integrity monitor IC360 and data suppliers.
The commission described ongoing ties to unlicensed operators as a threat to a licensee's "suitability concerns" and told recipients that supporting such activity could cost public confidence in the state's regulated market. Licensees and applicants have until 30 October to confirm they have stopped any such support.
Away from enforcement, IG Group signalled growth ambitions for its prediction markets business. Months after completing a $1.3bn acquisition of Underdog, the London-listed trading group told investors on Thursday that it sees, in its own words reported by SBC News, a "strong appetite for prediction markets in the UK" and intends to launch there as early as this year.
IG Group plans to fold predictions, cryptocurrency and conventional trading into a single in-house platform, with sport, politics and entertainment markets expected to follow by early 2027. The company has applied for a betting licence from the UK Gambling Commission, and any UK sports prediction product would sit under both the Gambling Commission and the Financial Conduct Authority.
Underdog co-founder and chief executive Jeremy Levine, speaking at a virtual IG Group shareholder event earlier this month, said the company felt "really well set up for any outcome" as it awaits what is widely expected to become a Supreme Court test of sports event contracts' legal status in the US.
Canadian regulators, meanwhile, moved in the opposite direction from IG Group's UK ambitions, with financial authorities explicitly prohibiting sports-related prediction contracts even as the underlying legal fight continues to play out south of the border.