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The Arizona Department of Gaming (ADG) has joined the growing list of states criticizing the Commodity Futures Trading Commission (CFTC) for not taking adequate action against prediction platforms offering contracts on sports events.
On Monday (June 3), the head of the ADG, Jackie Johnson, wrote to the CFTC Chair Caroline Pham to express her frustration over operators offering sports-event contracts. Johnson contended that these practices constitute a clear violation of state gaming laws. She specifically pointed to Designated Contract Markets (DCMs) such as Kalshi, Robinhood, and Crypto.com, labeling their activities as ‘illegal’ sports betting, a serious felony in Arizona.
“The DCMs claim that their operations enable ‘trading’ of financial derivatives, which is conduct regulated by the CFTC. In truth, there is no meaningful difference between buying one of the contracts offered by the DCMs and placing a bet with any other sportsbook,” the letter stated. “And, whatever regulation the CFTC undertakes, it does not reflect the desires of the citizens of Arizona.”
Tribal Gaming Compacts in Danger According to ADG
In her letter to the CFTC, Johnson also highlighted concerns relating to the 2020 Gaming Act, which legalized online sports betting in Arizona. She emphasized that lawmakers never intended for this act to open the door for residents to gamble on sports through Designated Contract Markets (DCMs). “To be clear, the people of the State have significant interest in the CFTC taking action to stop the DCMs,” she stated.
The 2020 Gaming Act also limits betting licenses to 20, which are shared between professional sports teams and federally recognized tribes. Those licensed operators undergo thorough background checks, pay licensing fees, and must adhere to strict regulations regarding geolocation, responsible gambling, and tax obligations.
In contrast, DCMs like Kalshi pay none of these fees, creating what the ADG described as an unfair competitive advantage.
Johnson also pointed out that the operations of these DCMs violate state laws and disrupt tribal-state gaming compacts established under the Indian Gaming Regulatory Act. These agreements, forged over decades, strictly govern gambling on tribal lands and are crucial for maintaining revenue streams for tribal nations.
“The DCMs have come into Arizona and upset these carefully constructed agreements, despite the extensive requirements surrounding gambling on Indian lands,” she stressed.
ADG Calls on the CFTC to Do More
Jackson went on to criticise the CFTC for allowing sports contracts to operate without proper regulatory scrutiny. She noted that the commission not only permitted these contracts to take effect but also recently canceled a roundtable meeting intended to address concerns raised by several states, including Tennessee and Maryland, as well as organizations like the NBA.
“The CFTC allowed their sports outcome contracts to take effect without review or comment,” Johnson wrote.
She expressed disappointment at the CFTC deciding to drop its appeal against Kalshi in the U.S. Court of Appeals for the D.C. Circuit. “The CFTC’s inaction in enforcing its own rules… has prioritized the private business concerns of a handful of [Designated Contract Markets] over the public’s interests.”
Johnson closed the letter by urging the CFTC to reconsider its decisions, claiming that the DCMs’ offering of event contracts constitutes gambling, contradicts the public interest, and should ultimately be prohibited.
Last month, the ADG issued cease-and-desist letters to these prediction platforms, joining Nevada, New Jersey, Maryland, Montana, Ohio, and Illinois in states pushing back against the fast-rising sector.
Source: Next.io
