Cryptocurrency derivatives platform ErisX is making an unusual attempt to push through futures contracts tied to the outcome of National Football League (NFL) games.
According to a report from Bloomberg on Tuesday, ErisX formally asked the Commodity Futures Trading Commission (CFTC) in mid-December to give the green light to its gambling-linked futures.
Approval for three types of contracts on NFL games is being sought. One is based on the winner of a game, the second is based on the point difference scored by a particular team while a third is based on total points scored.
Because of differing laws across U.S. states around sports betting, sportsbooks have experienced major disparities in the amount of wagers drawn by teams. This has the potential to create an imbalance that leads to gambling venues having to pay out more to bettors than they take in.
Hinging on that fact, ErisX’s proposed financial instruments are being touted as having nothing to do with betting, but rather as tools for managing risk. Their objective is to hedge against “economic risk” for sportsbooks, said ErisX’s CEO Thomas Chippas in Bloomberg’s report. “This is not a substitute for gaming.”
If approved, trading of the NFL futures contracts would be open to sportsbooks, vendors and companies that agree to help set prices and participate as market makers, while individuals and hedge funds will be banned from participating.
Pending a 90-day review for public comment, the CFTC’s response on the matter is expected around mid-March. If the exchange is given the OK by the regulator, professional baseball and basketball would likely be targeted next.
ErisX partner Jeff Ifrah, a criminal defense attorney with expertise in gaming law, is also helping ErisX’s effort. Together, the exchange and the attorney, with the backing of influential CFTC lobbying firm Delta Strategy Group, have reportedly spent several months in discussions with the regulator’s commissioners.
The CFTC has apparently questioned if the contracts “are contrary to the public interest,” and is casting a cautious eye over whether the products would fly in the face of the U.S. law against gaming contracts. The nation officially banned financial instruments associated with gaming in 2010.
The regulator is also trying to determine, via public comment, if the contracts proposed by ErisX could be used to manipulate the outcome of a sporting event.
“The only winner under this type of proposal are the casinos themselves,” said Les Bernal, national director of the U.S.-based advocacy group Stop Predatory Gambling, in the report. “It’s going to lead to citizens losing billions of dollars more money than they already are losing.”