CFTC pauses micro contracts from Novig and ProphetX over manipulation concerns

The Commodity Futures Trading Commission paused micro contracts on the first points scored in basketball games from Novig and scorigami contracts from ProphetX, the regulator said.

The CFTC sent letters to Novig and ProphetX warning that self-certified contracts from the prediction markets may not be allowed under the Commodity Exchange Act, according to FOS.

Manipulation concerns

The CFTC told Novig that micro contracts, such as who scores the first points in a basketball game, are susceptible to manipulation and should not be listed, according to FOS.

ProphetX’s scorigami contracts, which pay out on a final score that has never happened before in a sport’s history, were deemed not to meet the CEA’s definition of a swap. The contracts were self-certified but have not been listed, so no one has traded on them yet.

ProphetX told FOS it was asked to voluntarily defer listing the scorigami contracts rather than withdraw them. The company said it complied and has since provided additional analysis to the agency.

Broader regulatory action

CFTC staff issued an advisory that raised the bar for mention markets because of their susceptibility to manipulation. Kalshi ended its program shortly after the advisory, nearly a year earlier than scheduled.

The CFTC proposed a rule on Oct. 9 that would further define a swap to include event contracts tied to sports, politics, culture and weather, a move that would strengthen its claim to exclusive jurisdiction over those markets.

Sports leagues respond to micro betting

The NBA banned certain prop bets at sportsbooks before the start of the season, though the rules exclude prediction markets. The NBA’s betting partners, which also include DraftKings and FanDuel, cannot offer parlays combining multiple unders on the same player’s statistics, bets on opening tips and certain individual plays and unders on players expected to play fewer than 12 minutes.

The NFL has sent multiple notices to prediction markets about “objectionable bets” and filed an amicus brief with the Supreme Court arguing sports event contracts should fall under state regulation.

Terry Rozier faces allegations of manipulating his performance so bettors could cash under bets. Rozier has pleaded not guilty and denied wrongdoing. Jontay Porter received a lifetime ban from the NBA for betting violations.

Last November, the MLB worked with sportsbooks to cap bets on individual pitches at $200 and prevent them from being included in parlays after two Cleveland Guardians allegedly conspired with bettors on what those pitches would be.

New Jersey lawmakers have been attempting to pass legislation that would ban such wagers. S2160 advanced past its first committee vote in March, but it has not moved since.