Polymarket Expands to 20 Leagues, Facing Regulatory Conflicts

Polymarket is expanding its partnerships with major U.S. sports leagues and data providers, leading to increased regulatory conflicts surrounding the sports prediction market. While the leagues emphasize fan engagement and the use of official data, some state governments and courts are questioning whether contracts related to sports events fall under gambling regulations.

On March 19, MLB designated Polymarket as its official prediction market trading partner. In the same announcement, Polymarket received rights to use the MLB mark and logo, as well as access to official league data, and MLB signed a memorandum of understanding (MOU) with the U.S. Commodity Futures Trading Commission (CFTC).

This MOU establishes a framework for information exchange between MLB and the CFTC regarding prediction markets related to baseball and game integrity issues. It indicates a trend where prediction market platforms are simultaneously entering the realm of official data from sports leagues and regulatory oversight.

Last October, the NHL designated Polymarket and Kalshi as its official prediction market partners. The two companies can utilize NHL data, logos, and broadcasting exposure. MLS also announced Polymarket as its official exclusive prediction market partner in January.

Sports data provider Sportradar expanded its relationship with Polymarket to over 20 global leagues and competitions on August 27. Sportradar stated that it provides data, streaming, and integrity services for approximately 300,000 matches annually, including Bundesliga, EuroLeague basketball, and tennis Grand Slams.

A prediction market is a market where contracts are bought and sold based on the outcomes of specific events. The sports prediction market targets sports events such as game results or player statistics. While the user experience may resemble betting, the platform describes it as event contracts within a derivatives market.

The key issue is legal classification. If viewed as a prediction market, the CFTC's regulatory framework for derivatives takes precedence. If viewed as sports betting, state licensing, age restrictions, taxes, and gambling regulations may apply.

The CFTC has not issued a single clear signal either. On February 17, the CFTC reaffirmed its exclusive jurisdiction over the event contract market, including prediction markets, in a court filing. However, on February 25, it cited specific event contract cases traded on Kalshi, warning about the risks of insider trading and fraud, and on March 12, it emphasized the regulatory obligations of designated contract markets (DCM) that include sports-related event contracts.

CFTC Commissioner Michael S. Selig stated regarding the MOU with MLB, "This is a step to have additional tools to protect this market and its participants from fraud, manipulation, and other abuses." This has led to interpretations that the CFTC is moving towards establishing oversight mechanisms and regulations rather than outright banning sports prediction markets.

On June 10, the CFTC also released a new rule proposal regarding event contracts that could be linked to sports, gaming, and illegality, opening a public comment period. The expansion of the market and regulatory adjustments are not progressing at the same pace, creating a structure where the interests of platforms, leagues, and state governments intersect.

Pressure from state governments is increasing. New York State filed a lawsuit against Kalshi on July 31, claiming illegal gambling operations. The New York Attorney General is seeking a court order to cease unlicensed gambling operations, impose fines, recover illegal profits, and compensate users.

California joined a coalition of 37 state attorneys general opposing Kalshi on June 12. State governments argue that even if sports event contracts are traded in CFTC-registered markets, they cannot circumvent each state's gambling laws.

The most recent court ruling has also placed a burden on the platform. The Ninth Circuit Court of Appeals ruled on August 28 that Kalshi could not prevent oversight by the Nevada gambling regulatory authority. Reuters reported that this decision diverged from a ruling by the Third Circuit Court of Appeals regarding a New Jersey case, increasing the debate over who regulates prediction markets, state governments or the CFTC.

This controversy is not solely a problem for Polymarket. Many actual lawsuits and rulings have centered around Kalshi. However, Polymarket has also become a key player in the expansion of the sports prediction market through its partnerships with MLB, NHL, MLS, and Sportradar.

For Korean readers, this issue is also related to how prediction markets absorb sports demand. We previously reported on the trend of sports parlay contracts being tested on the Polymarket API. The resurgence of the debate over CFTC jurisdiction following the Kalshi ruling is also in the same context.

The amount of the MLB contract has not been disclosed in the official announcement. Some reports suggest an amount and duration around $300 million (approximately 413.4 billion KRW), but the figures vary among reports, making it difficult to determine the total amount. What is currently confirmed is that the expansion of partnerships between leagues and data providers is occurring simultaneously with regulatory pressures from courts and state governments.

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