Regulatory Scrutiny Likely for Crypto.com's Sports Endorsements by CFTC
In a move that could shake up the sports betting industry, Crypto.com and Kalshi, two prominent brokerage firms, are looking to steer their efforts towards sports derivatives. This shift comes as the Commodities and Futures Trading Commission (CFTC) considers a 90-day review of Crypto.com's sports event contracts.
The timing of this potential review is particularly interesting, as President-elect Trump is set to become the 47th US president next Tuesday. This could potentially result in a change of leadership at the commission.
Crypto.com, a company regulated at the federal level, can offer its trading services in all 50 states. Last week, the firm expanded its sports event contracts menu to include the NFL conference championship and the last three games of the college football playoffs (CFP). The company announced its plans to offer derivatives on the Super Bowl just two days before Christmas.
The regulatory approval of sports event contracts could represent a significant competitive threat to traditional sportsbook operators. Sports wagering is currently allowed in 38 states and Washington, D.C., with Missouri joining that group later this year.
Crypto.com's new sports event trading offering is the first of its kind and will be offered by Crypto.com | Derivatives North America. Traditional sportsbook operators, on the other hand, receive approvals to offer iGaming and sports wagering on a state-by-state basis.
The CFTC's examination of Crypto.com's sports event contracts is not expected to interfere with the brokerage firm's plans to offer derivatives on the Super Bowl, scheduled for Sunday, February 9 in New Orleans. However, the review is likely to investigate whether the sports contracts offered by Crypto.com could violate gaming laws.
A representative of Crypto.com expressed disappointment about the potential CFTC review, stating that the commission didn't have adequate time to review Crypto.com's plans due to the holiday season.
In a recent development, Donald Trump appointed Brian Quintenz as the new chairman of the CFTC. Quintenz, who previously served as a commissioner at the CFTC, is seen as a proponent of cryptocurrency and blockchain technology. This could potentially lead to a more crypto-friendly approach at the commission.
Despite the potential review, brokerage firms like Crypto.com and Kalshi are showing increasing interest in the event contract arena. Donald Trump Jr. is joining Kalshi as a strategic adviser, further signalling the growing interest in this sector.
As the CFTC's review progresses, it remains to be seen how it will impact the burgeoning sports derivatives market and traditional sportsbook operators.
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