23◼FINANCE BloombergBusinessweek February 8, 2021
now accounts for an estimated $1.4 billion in annual
revenue in the U.S., and data firm H2 Gambling
Capital predicts that may double soon. Twenty-five
states and the District of Columbia now allow sports
wagering, and more are considering legalizing it.
“The numbers in this space are enormous,”
says Chippas of ErisX. His company was brought
into the venture after its lobbyists at Delta Strategy
introduced the company to Ifrah. A criminal
defense attorney who’s also developed an exper-
tise in gaming law, Ifrah came up with the idea for
the contracts and launched a business called RSBIX
to design and market them. The lawyer says he’s
never placed a bet himself.Initsapplication,ErisXis seekingapprovalfor
three different types of contracts on NFL games,
each mirroring a common type of bet. One is based
on the so-called moneyline, a wager on the outright
winner of the game. Another contract takes into
account the point spread for the favored team. And
the third is on the “over/under,” or the total points
scored. The futures are designed to help solve a
problem in sports betting that’s cropped up because
it’s legal only in individual states. That can result in
the local team drawing most of the wagers, setting
up a sportsbook for an imbalance that could poten-
tially lead to a big loss.
The problem is particularly acute, the futures
advocates say, with high-profile events such as
the Super Bowl. In its CFTC application, ErisX
cited reports of Rhode Island- and New Jersey-
licensed sportsbooks losing millions on the 2019
game between the New England Patriots and the
Los Angeles Rams, which the Patriots won, 13-3,the futures, setting off a 90-day waiting period so
that the agency could seek comments from the pub-
lic. The exchange and its partner, attorney Jeff Ifrah,
havespentseveralmonthsmeetingwiththeagen-
cy’scommissionersandmakingtheircasewithhelp
froma well-connectedCFTClobbying firm, Delta
Strategy Group. If the CFTC assents to their pro-
posal, they would like to quickly offer futures for
professionalbasketballandbaseballaswell.
The CFTC istreadingcarefully. It’s asked
interested parties to weigh in on a series of ques-
tions, including whether the futures “are con-
trary to the public interest”; whether they could
be used to influence the outcome of a sporting
event; and if the products would fall under the
ban on gaming contracts. If the agency signs off,
some critics say the regulator, which was estab-
lished mainly to police agricultural commodities
and protect farmers, would be entering into ter-
ritory it knows little about.
It could also in essence be putting a govern-
ment stamp of approval on the gambling industry.
Even if individual investors are never allowed to
trade such futures, giving gaming companies the
ability to transfer some of their risk would allow
casinos to accept more—and larger—wagers. “The
only winner under this type of proposal are the
casinos themselves,” says Les Bernal, national
director of the Washington advocacy group Stop
Predatory Gambling. “It’s going to lead to citizens
losing billions of dollars more money than they
already are losing.”
The CFTC’s “approval is highly unlikely,” says
Patrick McCarty, who as a Senate Agriculture
Committee aide helped draft the derivatives provi-
sions in the 2010 law that barred gaming contracts
and now runs his own government affairs firm. He
also notes that the CFTC should be wary of setting a
precedent that could put it in the position of doing
an end run around gambling regulation, which is the
responsibility of the states. “It’s like opening a door
that the commission doesn’t want to go through.”
Another potential hurdle is the sports leagues
themselves. In comments to the CFTC, both the
NFL and the National Basketball Association were
lukewarm on the prospect, saying the agency should
take its time studying the issue. “We want to work
with the sports leagues to make sure their concerns
are addressed,” Ifrah says.
The CFTC’s decision is likely to be closely
watched not only in the gaming world but also on
Wall Street, where gambling is a favorite pastime of
traders. Gaming is seen as a big business opportu-
nity as well. Betting on individual sporting events,
which was legalized by the Supreme Court in 2018,
SportsBetting
Legalandlive Legal,notyetlive Legislationpre-filedorintroducedin 2021*
No legislation in 2021 to dateMAP INCLUDES BETTING ACTIVITIES OFFERED THROUGH RETAIL AND/OR ONLINE SPORTSBOOKS. LEGAL STATUSES AS OF FEB. 2.*INCLUDES SCHEDULED VOTER REFERENDUMS. DATA: AMERICAN GAMING ASSOCIATION