Over the previous ten days, the sports activities world has been rocked by scandal. Greater than 30 people have been arrested by the FBI for allegedly turning professional basketball into what investigators describe as a legal betting ring powered by insider info. On the identical time, prediction markets like Kalshi and Polymarket are all of the sudden in all places. Kalshi is tied up in lawsuits throughout the nation. Polymarket is trying to re-enter the United States after being pushed offshore. All of it raises a easy query with huge penalties. As prediction markets develop, are we heading towards extra match fixing and extra insider buying and selling?
The most recent FBI bust solely heightened these issues. On Thursday (October 23), federal brokers arrested an NBA participant and a coach, accusing them of schemes that included manipulating sport outcomes to swing bets.
That got here simply 24 hours after the NHL became the first major sports league to signal a licensing settlement with prediction markets. These are the quick rising websites that seem like the following large factor in betting, however usually function in murky authorized territory.
The identical day, DraftKings jumped in by acquiring a prediction market firm, signaling that the business’s greatest gamers see critical upside.
All of that is taking place as federal authorities begin drawing parallels between sports activities betting and insider buying and selling. Some consultants warn that shifting betting exercise into prediction markets may make these dangers worse. Others imagine that utilizing public blockchains may supply transparency that conventional sportsbooks can’t match.
Two consultants who spoke instantly with ReadWrite mentioned prediction markets are nonetheless playing at their core, and will introduce a brand new “aspect of threat.”
CFTC faces criticism over alleged lack of scrutiny of prediction markets
These platforms operate by letting customers purchase futures contracts tied to actual world outcomes. That places them underneath the oversight of the Commodity Futures Buying and selling Fee, a regulator that has spent most of its 50 years watching agricultural derivatives, not professional sports activities. Now the CFTC is anticipated to supervise each this new class of sports activities contracts and far of crypto, largely because of a serious push by the current Trump administration.
“The buying and selling limits in prior prediction markets have been too small to create the incentives crucial to repair matches or threat prosecution for insider buying and selling. Additionally, increasing to sporting occasions launched a complete new aspect of threat.” – Tom Gruca, Iowa Digital Market Professor in Advertising and marketing and Director
A former CFTC official informed Decrypt, “I believe the CFTC goes to get swallowed.” The official added, “You’re going to see increasingly more of those circumstances of insider buying and selling taking place on prediction markets, as a result of the CFTC isn’t doing surveillance, they don’t have the manpower to catch it on their very own.”
Authorized analyst Daniel Wallach echoed the priority throughout a latest Indian Gaming Affiliation webinar. He mentioned that Kalshi CEO Tarek Mansour “teased the potential of different sports activities leagues signing comparable partnerships,” although leagues just like the NBA and MLB have already warned regulators that present safeguards are inadequate.
Wallach identified that prediction markets are in a position to “self certify any occasion contract they need and it goes into impact instantly which is hysterical.” He added that the “CFTC already has a regulation that expressly prohibits occasion contracts” and cited rule 40.11, which bans contracts associated to gaming or something unlawful underneath state regulation.
In his view, “All of these persons are benefiting as a result of the CFTC has been infiltrated and captured by the Trump administration and refuses to implement that present rule.”
Prediction markets may herald further match fixing ‘threat’
Tom Gruca, professor of promoting and director of the Iowa Electronic Market, the primary prediction market based in 1988, shared his insights with ReadWrite.
When requested whether or not the rise of prediction markets like Kalshi and Polymarket may enhance the possibilities of match-fixing and insider buying and selling, he answered, “Sure. The buying and selling limits in prior prediction markets have been too small to create the incentives crucial to repair matches or threat prosecution for insider buying and selling. Additionally, increasing to sporting occasions launched a complete new aspect of threat.”
On the road between regulated derivatives and playing, he defined, “Regulated derivatives are supposed to assist market individuals mitigate threat, e.g., having crop costs rise when you will have already set costs on your finish product like breakfast cereal. Playing is the introduction of threat the place none existed earlier than. There is no such thing as a threat related to who wins the primary sport of the world collection. Gamblers (and playing websites) create that threat.”
He mentioned league partnerships may assist by eliminating prop bets, which removes incentives for particular person gamers to take part in fixing. However he warned that fixed playing promotion “creates the looks that playing is extra necessary than the video games themselves,” and that this poses reputational dangers when match fixing inevitably happens.
On crypto-native platforms, Gruca mentioned, “There aren’t any restrictions on who’s taking part. They could possibly be minors. Additionally, it isn’t clear who regulates the verification of the identification of the bettor. It’s simpler to see match fixing when you may have insights into why the costs are shifting because of the actions of some particular person merchants.”
He additionally warned that prediction markets supply “a straightforward technique to launder cash if there aren’t any identification controls,” and mentioned tax evasion is simpler when platforms function with out clear regulation.
Blurred strains between betting and derivatives
Daniel O’Boyle, Senior Enterprise Reporter for InGame.com, informed ReadWrite that the divide between derivatives and playing is already blurred.
“No one actually is aware of precisely the place the road is,” he mentioned, including that many prediction market merchandise fall into each classes. A contract provided on a CFTC regulated trade is, by definition, a by-product. But when that contract is tied to a sports activities final result, “it’s clearly playing.” The result’s a bizarre overlap the place one thing might be each on the identical time.
“Possibly – not less than in the mean time, no crypto-native platforms are working underneath CFTC registration – CFTC guidelines successfully make it not possible. So these platforms like Polymarket are primarily self-regulated, so there’s no person on the market ensuring they implement insider buying and selling guidelines.” – Daniel O’Boyle, InGame Senior Enterprise Reporter
He mentioned league partnerships may assist if leagues demand sturdy integrity requirements. But when leagues merely settle for cash for “official companion” branding, he worries they are going to be endorsing prediction markets much less geared up to combat match fixing than sportsbooks.
On crypto-native platforms like Polymarket, O’Boyle mentioned they function with out CFTC registration, which suggests “there’s no person on the market ensuring they implement insider buying and selling guidelines.” Kalshi not less than publishes lists of people who find themselves prohibited from buying and selling. Polymarket typically don’t. That absence will increase the prospect of suspicious exercise, corresponding to odds spiking proper earlier than an announcement. He famous that public blockchain knowledge can, in principle, assist detect these patterns, however provided that platforms select to implement honest play.
He additionally identified that unclear or poorly outlined market guidelines can create alternatives for exploitation, and that prediction markets generally lack the accountable playing instruments that conventional operators present. The CFTC has no expertise regulating playing dependancy, leaving a spot that nobody is filling.
Issues over lack of guardrails
Wallach stays involved concerning the CFTC’s capability. “If there’s a regulation on level which says these should not allowed and the CFTC shouldn’t be implementing that rule, it does beg the query, why is that taking place?”
“As a result of its dimension and historic mandate, the regulator primarily depends on whistleblowers and self-reporting by market individuals to eradicate corruption on markets it oversees.”
— Daniel Wallach (@WALLACHLEGAL) October 26, 2025
He cited the federal government shutdown and mentioned the company at present has 30% fewer employees. “All of their workers are mainly furloughed, apart from 31 folks, which is lower than the scale of the Rhode Island Lottery Fee, which signifies that the Rhode Island Lottery is a extra strong regulator.”
He argued that, in observe, prediction markets face nearly no restraint. “There aren’t any guardrails, there’s no permission. You simply say, hey, I’m doing it.” He added that the CFTC has taken no enforcement actions, which is why firms be at liberty to increase aggressively. “Parlays and props, they’ll put up something that they need.”
In the meantime, Polymarket has proven little curiosity in addressing insider buying and selling issues. When the Nobel Peace Prize market raised questions on merchants presumably utilizing personal info, the corporate didn’t launch an investigation or situation an announcement. As an alternative, Polymarket reposted a information alert after which turned the state of affairs into advertising and marketing fodder. “JUST IN: It has been revealed solely 5 folks on the Nobel Peace Prize basis knew the winner earlier than they have been introduced,” the platform posted. “Everybody checking Polymarket knew.”
JUST IN: It has been revealed solely 5 folks on the Nobel Peace Prize basis knew the winner earlier than they have been introduced.
Everybody checking Polymarket knew.
— Polymarket (@Polymarket) October 11, 2025
Polymarket is making ready to relaunch in america underneath CFTC guidelines after being pressured offshore in 2022, however the firm didn’t reply to requests for remark from ReadWrite on its strategy to insider buying and selling.
Regardless of their variations, Kalshi and Polymarket share one thing politically notable. Each rely Donald Trump Jr. as an adviser.
ReadWrite has reached out to the CFTC, Kalshi, and Polymarket for remark.
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