Blog: Odds appear to improve for sports-based financial derivatives – Roll Call

Professor James Angel, who teaches finance at Georgetown University, anticipated that the ErisX proposal would lower costs by narrowing the “spread” between bets, meaning the difference between the payout for winning a bet and the cost of losing it, a disparity that benefits bookmakers, he said in an interview.

As for whether proposals like these will move forward, Angel noted that baby boomers are now the nation’s policymakers, and they have shown they are tolerant of gambling, he said.

At the CFTC, Berkovitz said the agency would make sure retail investors, ordinary folks investing their paychecks, would receive adequate protection from fraud or market manipulation. The NFL futures would be what’s known as binary options, where the investor either gets a payment or gets nothing. Binaries are permitted, although the CFTC has taken enforcement action against many that have not played by the rules.

Susquehanna International Group LLP, a large Wall Street market maker, supports the idea of sports futures. Market makers provide buy and sell prices of securities to make sure investors can trade if they need to, including for futures products. A regulated U.S. futures market would provide more tax revenue and better regulation, it told the CFTC in a letter on the issue. Currently, the U.S. market is less than 10 percent of the offshore gambling activity, it added, and CFTC futures might bring more of it back.

Another commissioner, Brian Quintenz, has signaled support, not just for sports futures but also for wider prediction markets. 

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