MLB Partners with CFTC and Polymarket to Regulate Prediction Markets: Safeguarding Integrity in Sports Trading
Sports leagues have been advocating for federal oversight of sports betting since the Supreme Court allowed its legalization eight years ago. Major League Baseball recently announced a partnership with the Commodity Futures Trading Commission to regulate prediction markets, with Polymarket becoming the official prediction market exchange of MLB. The agreement aims to prevent insider trading and market manipulation in prediction market exchanges, similar to the issues seen in sports betting. The CFTC will work with MLB to identify contracts with higher integrity risks on prediction market exchanges.
Prediction markets have gained popularity, with trading volume exceeding $60 billion last year, mostly from sports-related activities. MLB Commissioner Rob Manfred emphasized the importance of protecting the integrity of the sport while prediction market activities continue. The recent partnership between MLB and Polymarket includes measures to restrict markets that pose integrity risks, such as individual pitch results and umpire decisions. The CFTC has also engaged in discussions with other leagues to address similar concerns.
The CFTC's guidance to prediction market exchanges highlights the need to avoid offering contracts on events susceptible to manipulation, such as injuries and officiating. MLB's deal with Polymarket mirrors the integrity guardrails established in sports betting agreements, including the use of official data and control over market offerings. Polymarket will be the exclusive prediction market exchange with MLB and club marks on its app, while other authorized operators can advertise during game broadcasts if they adhere to MLB's integrity provisions.
Ari Borod, President of Sports Business Development at Polymarket, emphasized the importance of partnering with a professional sports league to enhance the credibility of prediction markets. MLB will treat predictions as a separate sponsor category from sports betting, allowing its official sportsbooks, FanDuel and BetMGM, to use league and team marks on prediction market apps. The multiyear deal between MLB and Polymarket allows MLB to exit if regulatory frameworks change, while Polymarket does not have the same option if its customer base declines due to sports betting legalization.
MLB's collaboration with the CFTC for federal oversight of prediction markets offers a streamlined approach compared to state-by-state regulations for sports betting. The partnership aims to safeguard the integrity of the sport and address potential risks associated with prediction market activities. The agreement between MLB and Polymarket sets a precedent for regulating prediction markets and ensuring transparency in sports-related trading activities.