Former Commodity Futures Trading Commission (CFTC) Commissioner Dan Berkovitz has renewed debate over the status of sports-based prediction market contracts, arguing that such products may fail to satisfy a key legal requirement under federal commodities law.

Speaking on The Policy Protocol podcast hosted by former federal prosecutor Renato Mariotti and Jito Labs Head of Operations Rebecca Rettig, Berkovitz discussed the role of prediction markets and whether sports-related contracts belong within the CFTC’s regulatory framework.

While expressing support for prediction markets in certain areas, Berkovitz drew a distinction between contracts tied to economically significant events and those based on sports outcomes.

“I think prediction markets have tremendous potential for adding valuable information and potentially hedging tools on various… issues that have economic significance and consequence,” Berkovitz said according to Deadspin. “I hope liquidity builds and that it will become part of the risk management tools that the private sector uses.”

Debate Centers on Economic Purpose Requirement

According to Berkovitz, the Commodity Exchange Act (CEA) requires regulated markets to serve a genuine economic function. During the podcast, he pointed to a past case involving ErisX, which sought permission to list National Football League-related contracts.

“When I was at the Commission, we had applicant ErisX, who wanted to trade NFL contracts because the [clearing] houses wanted to hedge their risk and they wanted to create a national market for this risk,” Berkovitz explained.

The application was later withdrawn in 2021 before the agency could issue a formal decision. Berkovitz said regulators at the time questioned whether sports contracts met the standards established by the CEA.

“We found that there wasn’t any ‘economic purpose’ under the CEA to sports betting contracts… you can say it, but that doesn’t make it true.”

In separate remarks on the podcast, Berkovitz emphasized that commodities regulation is intended to support commercial activity through risk management and price discovery. He argued that markets overseen by the CFTC must provide functions tied to economic activity rather than entertainment.

“We found that there wasn’t an economic purpose under the (Commodity Exchange Act) to sports betting contracts,” Berkovitz said. “The commodity markets are not for entertainment; they’re not to foster sports betting if there’s no economic purpose. They’re really for fundamental things that matter to the economy.”

The economic-purpose test is commonly viewed as a legal threshold within U.S. derivatives markets. Contracts generally satisfy that standard when they facilitate hedging, transfer risk related to real-world economic activity, or contribute to price discovery that market participants can use in decision-making.

Prediction Markets Remain a Regulatory Battleground

Berkovitz’s comments arrive as sports event contracts continue to generate disagreement among regulators, gaming interests, and prediction market operators.

Although he questioned sports-related products, Berkovitz noted that he served at the CFTC when Kalshi received its designated contract market license. At that time, Kalshi primarily offered contracts tied to political, financial, and cultural events. The company did not introduce sports event contracts until January 2025, nearly two years after Berkovitz’s term ended.

“There has to be an economic purpose to the markets that the CFTC regulates, and those relate to economic purposes in the context of the CEA (which) relate risk management and price discovery.”

Current CFTC leadership has taken a different position. Chairman Mike Selig has argued that prediction markets, including those involving sports outcomes, fall under the agency’s exclusive jurisdiction. President Donald Trump has also voiced support for prediction market exchanges such as Kalshi and backs the CFTC’s authority in the area.

At the same time, tribal gaming organizations and the American Gaming Association maintain that sports-related prediction contracts amount to unlawful wagering because they operate outside established state and tribal gaming frameworks.

Supporters of prediction markets counter that such contracts qualify as federally regulated swaps and therefore are not subject to state gaming oversight.

Former Officials Voice Similar Concerns

Berkovitz is not the only former CFTC leader questioning the agency’s current interpretation of federal law. Former CFTC Chairman Gary Gensler has also criticized the view that sports event contracts fit within the scope of the Commodity Exchange Act and the Dodd-Frank framework. Gensler recently submitted an amicus brief in Kalshi’s legal dispute with Ohio gaming regulators.

Gensler rejected the notion that Congress intended the CFTC to supervise sports wagering activities. “I never once ever heard a member of Congress or their staffs suggest that the law they were writing, acting upon, and voting on was for our little agency, the CFTC, to have oversight over sports betting,” Gensler said. “Betting on sports is gaming.”

The disagreement has intensified as prediction market operators and state gaming authorities continue to clash over the nature of sports event contracts. Industry supporters argue that prediction markets offer an alternative structure to traditional sports betting, while regulators in several states contend that the products effectively function as wagering markets without state licenses.

Meanwhile, the CFTC has proposed rules that would explicitly permit sports event contracts within its regulatory framework. If adopted, the proposal could significantly strengthen the position of prediction market operators and limit efforts by states to assert authority over the growing sector.