In a significant legal ruling, a Nevada judge has determined that Crypto.com’s sports prediction contracts do not qualify as “swaps,” leading to a ban on the company’s operations within the state. This decision comes after Judge Andrew Gordon denied Crypto.com’s request for a preliminary injunction, stating that the company must halt its sports prediction platform or risk facing financial sanctions.
Crypto.com maintained that its event contracts were financial “swaps” overseen by the Commodity Futures Trading Commission (CFTC), arguing that they were distinct from traditional sports bets. However, Judge Gordon concluded that these contracts rely on the results of sporting events, categorizing them under Nevada’s gambling regulations.
The judge’s decision appears to have been influenced by a Tribal Amici brief submitted on September 15, which argued for a clear distinction between the occurrence and the outcome of sports events. Sports betting attorney Daniel Wallach highlighted the connection between the brief and the ruling, noting Judge Gordon reflected the argument presented by the tribal brief in his final decision.
The brief articulated that Crypto.com’s contracts do not fit the definitions of swaps since they are contingent upon the outcome of sporting events, like which team emerges victorious, not merely whether the event takes place. A scenario cited in the brief illustrated how external factors, such as unfavorable weather potentially canceling a game, could allow for event contracts favoring a team not participating in a match.
This ruling has sparked controversy within the prediction market space, especially given that Kalshi, a competitor providing similar prediction services, has received approval to operate in Nevada. Polymarket has also resumed operations in the U.S. after securing a deal with the CFTC. The disparate outcomes for these platforms spotlight the ongoing ambiguity and inconsistency surrounding the regulatory environment for prediction markets in the United States.
While Crypto.com has been asked to cease operations in Nevada, reactions to the ruling reveal a divide among stakeholders. Critics argue that prediction markets operate as a means to bypass regulations surrounding conventional sports betting. Others contend that substantial operational differences justify categorizing them separately.
Inquiries have been directed to Crypto.com seeking a response to the ruling and its implications for the company’s future operations in Nevada.
