Sporttrade Seeks Federal Approval to Enter the Prediction Markets Scene

Sporttrade filed documents with the Commodity Futures Trading Commission (CFTC) to seek designation as a contract market (DCM), meaning that if approved, the company would gain the same status as prediction markets like Kalshi and Polymarket.

Sporttrade Makes Bold Move Towards Prediction Markets

The prediction market industry has seen rapid growth over the past year, while Sporttrade, which expanded into the US back in 2023 with a Colodaro launch, continues to await federal approval. Founder Alex Kane has been open about the company’s plans to apply for DCM designation, though preparing the application took several months. However, approving it might take much longer as DCM applications have often taken years to be approved. For example, Railbird and QCEX both applied in 2022 and only received approvals last year.

Currently, Sporttrade is licensed to offer sports betting in Arizona, Colorado, Iowa, New Jersey, and Virginia. Kane explained that the company had initially built its platform assuming the sports trading sector would follow the path of other electronic markets by moving toward efficiency and transparency through broker intermediation and institutional participation. He added that federal registration would allow Sporttrade to fully leverage its proprietary exchange, clearing, and broker technology, supporting its commitment to prioritizing the customer.

Preparations for the newest step have long been in the making. Last year, Sporttrade asked the CFTC for permission to operate across all 50 states, pushing for a potential hybrid status where a company is both federally- and state-regulated. 

Murky Legal Waters Remain on Sporttrade’s Path

While that request was denied, rendering Sporttrade to just a few states, this has not stopped the company from wanting to expand its reach in the US, hence the current DCM application. However, this also pushes Sporttrade into the legally highly-contested scene of prediction markets. Speaking on a New Normal webinar, attorney Daniel Wallach said that the application by a company that also operates as a licensed sports betting operator demonstrates that the distinction between sports betting and prediction markets does not translate into a meaningful difference in terms of the product. 

He explained that one of the most common mischaracterizations advanced by Kalshi and similar companies is the idea that operating as an exchange constitutes a significant distinction. Wallach noted that sports gaming laws have long recognized that peer-to-peer platforms and exchanges are, in fact, forms of gambling.

While Wallach might have explained that prediction markets are virtually indistinguishable from gambling, the Australian Communications and Media Authority (ACMA) straight up said that prediction markets are illegal. It came to this conclusion after investigating Polymarket’s activities and deducing that the platform’s offerings are more akin to gambling than to a traditional financial platform.