CFTC set to weigh probe into Crypto.com’s sports-betting futures

CFTC has questioned the legality of Crypto.com’s futures contracts that let users wager on sports events, Bloomberg reported, citing anonymous sources.

The five commissioners are to vote on whether to open a 90-day probe into potential breaches of gambling laws.

A Crypto.com representative told Bloomberg the agency had not notified the company of its plans.

“It is disappointing that the current and soon-to-depart leadership of the CFTC is considering such an action without allowing [successors] to determine the operating framework under their administration,” Crypto.com said.

On 19 December 2024, the company informed the Commission of its intention to launch 10 futures contracts on the outcomes of sporting events, including the Super Bowl.

Officially, CFTC members have one business day to review such applications, after which trading begins. In Crypto.com’s case, the Commission did not process the paperwork or respond because of the Christmas holidays, so the contracts launched the following Monday, 23 December.

According to a company representative, the team did not want to release new instruments “in the middle of the holidays,” but had to do so to ensure trading opened with enough lead time before the Super Bowl on 9 February.

Crypto.com offers “sports futures” on its Chicago-based derivatives platform at $100 apiece. The limit is 2,500 contracts for individual clients and 250,000 for market makers.

“You will see the line blur between what is legal, what is illegal, what is allowed, what is unacceptable. I think this strays very far from the origins underlying the CFTC’s work and from what derivatives markets should be,” said current chairman Rostin Behnam.

Reporters noted that under his leadership the Commission did not complete rules defining “problematic” topics in futures contracts on the outcomes of events in politics, sports, armed conflicts and other situations “inconsistent with the public interest.”

The next CFTC administration may inherit this task, and is expected to take a more liberal approach to regulating crypto exchanges.

Behnam will step down as chairman on 20 January and leave the Commission on 7 February 2025. There is no information yet on his successor; however, Bloomberg sources suggest it will be Brian Quintenz, policy director at a16z Crypto.

In October 2024, Crypto.com filed a lawsuit against the SEC in response to a Wells notice.