Pennsylvania regulator warns U.S. lawmakers over sports wagering through prediction markets

The head of Pennsylvania’s gaming regulator has urged federal lawmakers to address what he described as a growing threat posed by sports prediction markets operating under commodity trading rules rather than state gambling laws. Kevin F. O’Toole, executive director of the Pennsylvania Gaming Control Board (PGCB), said in a letter to the state’s two U.S. senators and 17 members of Congress that these “event contracts” could undermine the integrity of the state’s regulated sports betting industry. O’Toole asked Pennsylvania’s congressional delegation to press the Commodity Futures Trading Commission (CFTC) to consider the inherent problems caused by a dual-track system of state-regulated legal sports wagering and purported futures trading on sporting events under the façade of federal regulation. The letter follows testimony the PGCB submitted to the CFTC earlier this year. “Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law,” O’Toole wrote. “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 Supreme Court’s 2018 decision striking down the Professional and Amateur Sports Protection Act (PASPA) allowed states to legalize sports wagering. Pennsylvania was among the early adopters, introducing betting through licensed operators subject to strict consumer protection and responsible gaming standards. O’Toole said such protections are absent in the unregulated futures markets, where companies often “self-certify” compliance without CFTC review and allow participation by individuals as young as 18. The CFTC, he noted, was designed to oversee derivatives markets for “large and astute investors,” not retail participants betting on game outcomes. “The jurisdictional clash carries a significant risk of resulting in inconsistent and inadequate regulation,” he warned. “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,” O’Toole added, “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.” He cautioned that allowing such prediction markets to operate could create confusion among bettors and weaken oversight against potential match-fixing or insider exploitation. “Even worse,” O’Toole concluded, “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.’”