NFL Gambling Deal Architect Weighs in on MLB-Polymarket Partnership
Major League Baseball's choice to venture into the realm of prediction markets by partnering with Polymarket has sparked extensive conversation and argument, particularly for a league with a deeply troubled past regarding gambling, tracing back to the infamous Black Sox scandal during the World Series of 1919.
Troubled Past
On Thursday, MLB announced Polymarket as its official prediction market exchange (online platforms enabling users to bet on future outcomes). MLB joins a series of agreements that connect professional sports franchises with prediction market firms, including Major League Soccer's multi-year agreement with Polymarket revealed in January, as well as a collaboration between Polymarket and Kalshi with the National Hockey League that was made public last October.
Nonetheless, the discussions surrounding the legality of prediction markets are fervent. The American Gaming Association, which advocates for the regulated sports betting industry, has been engaged in an ongoing campaign to inform against sports event contracts that prediction markets present. The AGA has asserted that prediction markets ought to be regulated similarly to other types of legal, state-sanctioned sports betting.
MLB-CFTC Agreement
Entities such as Polymarket contend that their offerings are financial instruments supervised by the Commodity Futures Trading Commission (CFTC). A survey conducted by the AGA in September revealed that 85% of Americans asked perceived sports event contracts as gambling, while a mere 6% viewed them predominantly as financial instruments.
Under the terms of the agreement, Polymarket is permitted to utilize MLB trademarks and logos on its site, along with receiving data from Sportradar for its baseball-related markets. A significant aspect of this collaboration revolves around the creation of an integrity framework, aimed at jointly limiting markets that pose integrity threats, such as specific pitches, managerial choices, and umpire actions.
Legality Discussion
MLB and the CFTC also entered into an agreement focused on the confidential exchange of data, which is intended to safeguard the game's integrity by ensuring rapid responses to incidents and predicting new trends as prediction markets advance and change.
The responses to this initiative have been diverse – highlighting a vague distinction between gambling and investment, concerns about excessive risks, or the perception of it being a clever strategy to enhance fan involvement in a modern context. This includes utilizing cryptocurrency for wagers on Polymarket and leveraging the CFTC's oversight to maintain integrity.
A notable viewpoint on this matter comes from Doug Mishkin, a former attorney for the NFL and current partner at BCLP in Manhattan. Mishkin was the primary attorney involved in the NFL's significant gambling contracts, overseeing negotiations and drafting the agreements, while contributing to pivotal sports betting initiatives following the 2018 decision that legalized sports gambling across the nation.
Pro Sports Leagues and Prediction Markets
“At this point, with sports prediction market platforms enjoying widespread popularity among sports fans, it’s not irrational for leagues to conclude that their best option is to exert whatever control they still can via contractual partnerships – while naturally benefitting financially as well,” he said.
"But sports leagues and teams have not historically been immersed in the Commodities Exchange Act, which passed in 1936 – whereas with sports betting in the U.S., the leagues were actively engaged with state regulators at the outset, to help shape new state-by-state sports betting legislation. So this is new territory from that standpoint, and I expect there will be a learning curve on all sides to determine the most responsible, effective way to approach these partnerships.”
Integrity Concerns
Within the agreement between MLB and Polymarket, given the ongoing discussions about the legality of prediction markets throughout the nation, there are clauses included that would nullify the collaboration if judicial rulings determined that prediction markets contravene state legislation. Currently, multiple lawsuits in various U. S. states are tackling this matter.
“The concept of addressing legal contingencies in a contract isn’t novel – there are parallels to the daily fantasy sports industry around 2015, when leagues and teams were establishing official sponsorships, despite attorney general allegations around the country that DFS constituted illegal gambling,” said Mishkin.
Stakes Are High
“But DFS was operating on a state-by-state basis, undertaking individual analyses based on each state’s respective gambling laws. If courts ruled against DFS, the operator could simply exit the state. But prediction market platforms are operating nationwide, on the basis that they are governed by federal law – not state law – and have argued in court that it would be impractical and unduly burdensome to geo-fence individual states. On that basis, the stakes are arguably higher.”
Individuals' worries regarding the hazards to integrity in relation to baseball's past with gambling, along with the unclear distinction between prediction markets and gambling, are valid.
MLB Season Opens This Week
“The reaction of ‘How could leagues be partnering with platforms offering what is effectively sports betting without a license?’ is understandable,” said Mishkin. “Because even though the platforms at issue here are not unregulated, they are operating outside of the regulatory framework that sports leagues and teams worked hard to help shape – a dynamic which, on its face, raises concerns.
"But if leagues can effectively harness their leverage to secure contractual commitments to help address those concerns, and shape new federal regulations that would govern sports prediction markets – perhaps even in ways that are more robust and effective than what’s available under individual state laws – there could be an opportunity here to meaningfully improve the overall U.S. sports betting regulatory framework.”
