Quintenz reiterates pro-prediction market stance in confirmation hearing
On Tuesday, the US Senate Committee on Agriculture, Nutrition and Forestry held a long-awaited confirmation hearing for Brian Quintenz regarding his nomination as chairman of the Commodity Futures Trading Commission (CFTC). The agency, typically a niche derivatives regulator, has been thrust into the spotlight as prediction markets have proliferated.
Over the course of the 49-minute hearing, senators grilled the Ohio Republican about the various facets of leading the commission, on which he served from 2017-2021. The breadth of questioning was indicative of just how wide the commission’s scope really is.
In less than an hour Quintenz answered questions about agriculture, ranching, cryptocurrency, financial markets, bipartisanship and event contracts, all of which fit under the CFTC’s purview in some way.
Gaming stakeholders were closely watching Quintenz’s comments regarding prediction markets in particular. The markets, especially since launching sports contracts, have disrupted the states’ rights framework for gaming and have introduced a federally legal sports betting-adjacent product.
In 2021, when Quintenz still served on the CFTC, he publicly dissented from the commission and endorsed sports contracts as legitimate commodities in another case involving the exchange ErisX.
He made clear on Tuesday that he still strongly holds that belief.
‘That other act you mentioned’
“I believe that the law is very clear about events that have commercial, financial or economic consequence qualifying as commodities, because the [Commodities Exchange Act] recognises that therefore, a viable and valuable futures market can be listed upon them and afford people the opportunity for risk management, price discovery and price dissemination,” he said.
The quote came in response to a question about tribal gaming rights from California Senator Adam Schiff. Since the start of the year, tribes, especially those in California, have been at the forefront of the prediction market debate.
In late May, the CFTC met virtually with tribal leaders to hear their concerns. But current commission Chair Caroline Pham essentially said there was nothing to be done until a new regime is implemented, per InGame.
Quintenz told Schiff that, should he be confirmed, he would have “a very robust, all-stakeholder engagement process around this” and that he “would listen to the concerns of the tribes”. Yet his next comment seemed to indicate that he had no plans to interfere with the current trend.
“Nothing in the CEA that I’m aware of prohibits or affects the opportunity of tribes to offer those products, those markets and those services,” he stated.
Later, Schiff suggested that the Indian Gaming Regulatory Act is not preempted by the CEA, something that Indian law experts have argued. Quintenz notably referred to it in his response as “that other act you mentioned”.
Conflicts of interest
Several questions from lawmakers sought to address an elephant in the room – Quintenz currently serves as head of policy for a16z, a cryptocurrency venture capital firm and, as a board member for Kalshi, the most prominent US prediction market. He now stands to chair a commission heavily involved in the regulation of both.
Earlier this year Quintenz said in an ethics letter he would follow all necessary protocols to step down from his roles and divest any holdings. This was reiterated before the committee.
“I will abide by all applicable ethics statutes and regulations,” he asserted. “I have a very robust ethics agreement that does require my divestiture. I will have a screener in my office to ensure that no matter inappropriately comes before me.”
Pressed further on the issue, Quintenz maintained that he would not imprint his personal values into his work, despite the fact that his support for crypto and prediction markets is rather clear.
“In the past, the agency has taken an approach that I had disagreed with, in terms of adjudicating which contracts may be acceptable or not,” he said, acknowledging the ErisX case. “I believe that it is the role for this body and for Congress to decide what is acceptable or appropriate. I think it is the role of the agency to follow the statute.”
Yet, here too Quintenz was quick to caveat that he believes prediction markets to be in line with the statute (CEA), indicating that to him, overseeing prediction markets is simply following the law.
Do-it-yourself
One of the other notable lines of discussion involved the self-certification process. Unlike gaming regulatory frameworks, in which entities secure approval for an offering before it goes live, CFTC-regulated designated contract markets (DCMs) can self-certify contracts and begin offering them immediately.
The CTFC then follows behind and either requests that they be taken down or takes no action, which is most common. This is the primary reason why the range of sports contracts on prediction markets has expanded so quickly.
Detractors have harped on this point, saying exchanges like Kalshi are exploiting this system. Quintenz argued that such a system, which was implemented in the early 2000s, is necessary for efficiency.
“When the CFTC had to approve new futures contracts, futures exchanges listed about 700 products total,” he explained. “In the 20 years since self-certification came online through the Commodity Futures Modernization Act, 16,000 new contracts have been listed by exchanges. None of them caused the Financial Crisis.”
The times, they are a-changin’
It’s difficult to analyse Tuesday’s hearing from a legal sports betting perspective. Some might argue that sportsbooks have every avenue at their disposal, including offering prediction markets themselves, as Quintenz alluded to.
But that option is far from a guarantee. For one thing, court rulings or legislative interventions could quickly topple the progress prediction markets have enjoyed. That makes any substantial investment risky, although books are certainly doing their due diligence.
DraftKings earlier this year applied and subsequently withdrew an application for “DraftKings Predict” with the National Futures Association. Flutter confirmed in its Q1 earnings call that it has moved some Betfair staff to FanDuel to explore exchange possibilities.
Additionally, the question of market saturation becomes real very quickly. As of now there are just a few DCMs, but as Sporttrade CEO Alex Kane noted on a recent webinar, the market would likely suffer from an influx of exchanges all offering similar contracts.
Sports event contracts are currently somewhat bland compared to the parlay and bonus options offered by books, meaning market share would be tough to come by.
The traditional legal landscape, though, is also growing increasingly uncertain. Tax increases are becoming commonplace, including a first-ever per-wager tax recently enacted in Illinois. Some federal and state lawmakers have pushed for more stringent regulations and only one new market has legalised since the start of 2024 (Missouri). Some bills were even introduced this year seeking to rescind sports betting from various markets.
This groundswell, in conjunction with the advent of prediction markets, DFS 2.0, social sportsbooks and other adjacencies, makes for perhaps the most interesting time for bookmakers post-PASPA.