A Sports Betting Futures Market?

The proposal to create contracts on games faces a high regulatory hurdle

- By Pat Regnier and David Rocks

The futures market is often referred to as Wall Street’s casino. Now, in a twist, there’s a proposal to let casinos start trading futures.

The marriage of the gambling industry and high finance is being pushed by a cryptocurrency exchange and a Washington lawyer. Hoping to grab a piece of the billions of dollars flowing into the U.S. sports-betting industry, they’ve designed futures contracts based on National Football League games and are petitioning regulators to bless them.

That could be challenging: Congress banned financial instruments involving gaming in 2010. But the promoters argue that the futures, tied to the outcome of a football game, have nothing to do with gambling. Instead, they’re marketing the contracts as risk management tools for legal sportsbooks, akin to any other financial derivative a business might use to offset potential losses or protect against price swings. They’re essentially asking regulators to think of casino operators as farmers, but instead of using futures as insurance against a bad crop, they might be trying to hedge a Tampa Bay Buccaneers win.

Trading in the football futures would be limited to licensed sportsbooks, vendors, and companies that agree to help set prices and take the other side of trades as market makers. Individuals and hedge funds that may just want to speculate on the contracts would be barred from the market. “This is not a substitute for gaming,” says Thomas Chippas, chief executive officer of ErisX, the exchange that wants to list the contracts. “There is an underlying economic risk that is being hedged.”