PGCB Executive Director Warns About the Impact of Predictions Markets

In a letter addressed to Pennsylvania’s congressional delegation on Wednesday, Kevin F. O’Toole, executive director of the Pennsylvania Gaming Control Board (PGCB), expressed concern over the increasing prevalence of sports prediction markets, warning that they pose a “significant threat” to the state’s established gaming regulatory framework.

PGCB Executive Director Says Predictions Markets Create Back Doors

O’Toole warned that the emergence of these markets, which claim to operate under federal oversight, poses a direct threat to the carefully developed regulatory framework that Pennsylvania and many other states have established for gaming. He explained that sports prediction markets assert they are financial derivatives or swaps, and therefore not subject to state gambling laws. 

In his view, these markets essentially create a backdoor to legalized sports betting, running parallel to the state-regulated system but outside its stringent oversight. State regulators like the PGCB actively monitor betting activity for signs of suspicious behavior and work closely with sports leagues to help ensure the integrity of events.

In contrast, prediction markets are self-certified with the Commodity Futures Trading Commission (CFTC), which has yet to establish clear rules specifically for sports-related contracts. O’Toole pointed out that even the CFTC, in recent guidance, acknowledged it has neither approved nor confirmed the legality of the sports event contracts currently being traded.

O’Toole emphasized that the CFTC, as a financial regulatory agency, lacks the experience and infrastructure needed to oversee consumer gambling activities. He also warned that allowing the expansion of federally regulated prediction markets could flood the gambling landscape with unregulated entities and blur the clear lines between state-regulated betting and speculative financial trading.

O’Toole Calls for Action

O’Toole is urging Pennsylvania’s 17 US House members and two US senators to raise concerns with the CFTC. He believes a “dual-track system” has emerged—one involving state-regulated sports wagering and the other, so-called futures trading on sporting events, which he argues operates under the guise of federal oversight.

“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’s letter reads. “These markets effectively create a backdoor to legalized sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight.”

O’Toole concluded his letter by writing that he is willing to meet with members of Congress to further discuss the issue presented. He also once again reiterated that maintaining he integrity of state oversight is essential to preserving public trust and ensuring the economic stability of the state.