The NBA takes a gamble with its new partnerships
Ian Johnson, Sports Editor
Photo Courtesy of Josip Ivankovic on Unsplash
On Oct. 26, the NBA announced that it had agreed on a deal with Kalshi and Polymarket to make them the league’s Preferred Prediction Market Exchanges. The agreement comes as an attempt by the league to protect the integrity of the game and regulate sports betting across the league.
Over the last few years, multiple former and current NBA players were indicted on charges related to a sports gambling scheme (ESPN). In recent years, college basketball players were also banned from playing after they were caught in a sports betting scheme (NCAA).
“As this category develops, we believe it is important to work constructively with regulators and operators to help ensure that appropriate safeguards are in place,” said Scott Kaufman-Ross, NBA Head of Media Distribution & Partnerships. (NBA)
Prediction markets operate differently than the average sportsbook. In a prediction market, users buy and sell ‘yes’ or ‘no’ contracts that are tied to future outcomes. The prices of these contracts reflect the market’s supply and demand, similar to the stock market. In regular sportsbooks, the odds and prices are determined by the bookmaker.
Since the prediction markets operate differently, they are classified in a separate category. This difference in classification means they have to go by a different set of laws and guidelines. In states that ban sports betting, like South Carolina, these prediction markets are allowed to operate. All these markets are regulated at the federal level under the Commodity Futures Trading Commission (CFTC) rather than by a state gambling law.
A part of the deal limits what kind of bets can be offered, requires transparency over suspicious activities by users and bans league and team personnel from making trades related to league events.
“A big part of this is a limitation on the types of markets that can be offered,” Kaufman-Ross said. “We will have the right to approve the types of markets that are available on our games, which is a very important component for us” (NBC).
As the NBA agreed on these deals, they entered into a very controversial space that has many legal challenges against Kalshi and Polymarket. The leading issue has been whether trading on sports should fall under state gambling laws or the federal government. States across the country have taken legal action, with a major decision being made on Sept. 25. The 6th U.S. Circuit Court of Appeals ruled that states have a right to regulate sports-related contracts on platforms such as Kalshi. This rule applied to the states of Tennessee and Ohio but could be argued in any state. As a result, the CFTC has sued multiple states in response to the court’s ruling (Politico).
If these kinds of market trades fall under state laws, then the decision falls to the governor and the state government. In South Carolina, the governor elections took place on Nov. 3. Both candidates have spoken on sports betting and gambling with Alan Wilson, Republican nominee for governor and current Attorney General, saying he was in favor of allowing online sports betting. He stated that with legalized sports betting, the state can regulate it and set up guardrails (TheState).
With more potential laws about expanding gambling becoming increasingly frequent, the governor race and the upcoming elections could play a big part in the future of sports betting and gambling in South Carolina.
