In a significant move sure to attract the attention of Hollywood executives, the regulatory agency that oversees prediction markets is questioning whether it should allow betting on reality shows, music competitions and other entertainment shows as they exist now.
The Commodity Futures Trading Commission on Wednesday published a notice of proposed rulemaking seeking public comment on its rules and definitions, a move that would codify its oversight of things like sports betting in prediction markets, and allow it to ban other types of markets.
It all depends on the proposed definition of “gaming” that the CFTC is seeking. Under federal law, the agency is authorized to block markets based on “terrorism,” “assassination,” “war,” and “gaming” if it finds they conflict with the public interest. Here, the CFTC argues that a more precise definition of “gaming” is needed to meet this moment.
This means clarifying whether entertainment content is important or not.
last month, Survivor Aubry Bracco was crowned the winner of his 50th season, but Kalshi or Polymarket users likely knew that already. Before the season premiered on CBS, Bracco’s odds on the prediction market were over 80 percent, suggesting that insiders, whether at the network, the production company or another entity involved with the show, sought to capitalize on their inside knowledge.
Jeff Probst, host and executive producer of SurvivorHe was furious, saying prediction market companies “incentivize people to lie, cheat and steal to get ahead.”
So, given this context, what are “games”?
The CFTC explicitly says that awards shows like the Academy Awards, Grammy Awards, and Emmy Awards no Games.
“The outcome of these contests depends on voters’ judgment about who should receive the prize based on a range of considerations beyond the luck, skill, or athletic ability of the participants demonstrated during the contest,” the CFTC wrote. “Because the award is based on evaluative judgments, not on measurable events based on participants’ skill or athletic ability in the activity itself, it is a competition, not a game.”
Also, betting on the results of political elections is not considered gambling.
The CFTC also goes into great detail to clarify that sports betting (at least most Sports betting) is permitted by definition for games, but does not do so for televised contests that are not sporting events. So he is asking the public for help.
“The Commission requests comment on its proposed definition of gaming. Commenters are invited to discuss whether the Commission should provide its views on whether other activities constitute ‘gaming,'” the CFTC wrote.
“For example, should game shows, reality show competitions, beauty pageants, and similar events be considered ‘games’?” It continues. “The Commission notes that game shows are typically subject to various standards intended to promote impartiality and fair competition. Other contests may permit deviations from these standards to enhance their entertainment value. Music and talent contests often have similarities to elections. How, if at all, should the Commission consider these characteristics in the context of event contracts involving these activities?”
Of course, predictive market betting goes far beyond simply betting on the winners of reality competition shows (like those found in… Love Island). There are markets where songs will lead Bulletin board charts, who will headline the Super Bowl halftime show, when Taylor Swift (or other artists) releases a new song or album, and whether characters on certain TV shows will say certain words in a given episode.
The CFTC seems keenly aware of the risks of betting on events of which they know the outcome, saying that some contracts “may create unique incentives for information leakage or misuse of material nonpublic information — for example, by encouraging individuals with privileged access to disclose or act on such information, by incentivizing the unlawful acquisition of additional sensitive information, or by enabling third parties to pressure, solicit, or bribe such individuals to obtain it.”
“These incentives may present significant public interest concerns with respect to event contracts involving the listed activities, particularly when the information is highly sensitive and closely guarded, and meaningful visibility of the underlying event is concentrated among a small number of individuals,” with national security being likely the most important example. In fact, the entertainment contract outcome looks like small potatoes in comparison.
But for Hollywood, it still matters, and these rules could make a meaningful difference, though comments from the CFTC certainly suggest they could allow some entertainment bets, even if they prohibit others.
In fact, the CFTC suggests that entertainment companies could even use price discovery from sports betting for their own purposes.
“For example, aggregate prices for sports scores could inform final decisions by sponsors, broadcasters, advertisers, or local businesses,” the CFTC wrote.
Michael S. said: “The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” Selig, Chairman of the CFTC, said in a statement. “This proposal gives the Commission a permanent and transparent framework to identify contracts that Congress has directed us to audit while allowing legitimate markets to move forward.”
