Smarkets Chases CFTC License, State Sportsbook Bids
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- Smarkets filed for a CFTC license in March and has pending sportsbook applications in Illinois, Iowa, and Michigan, while already operating as a sportsbook in Indiana, founder Jason Trost said.
- Trost said the dual-track strategy exists because it's unclear whether the CFTC has federal preemption over prediction markets, making a single regulatory path too risky.
- 44 state attorneys general wrote last month that the CFTC cannot be the exclusive regulator of sports-related event contracts on exchanges, escalating the jurisdictional fight.
- Kalshi dismissed New York's July lawsuit as "political theater," arguing states cannot shut down federally licensed exchanges and that users would be "driven offshore."
- DraftKings and FanDuel launched prediction markets late last year, and Flutter told investors its prediction market platform gains customers faster in states where sportsbooks face scrutiny.
- Smarkets runs in four European countries — Ireland, Malta, and Sweden among them — giving it experience navigating contrasting regulatory regimes, Trost said.
- Trost warned that "some of my competitors are in danger of ruining the reputation of this industry" by acting irresponsibly and not following regulation closely, positioning Smarkets as a cooperative "good actor."
Why it matters: The CFTC-versus-states jurisdictional battle is forcing prediction market operators into a bifurcated playbook: fight in court (Kalshi) or cooperate with state regulators (Smarkets). Smarkets' willingness to absorb higher compliance and tax costs as a state-level sportsbook in three additional states signals it sees regulatory friendship — not litigation — as the cheaper path to U.S. market share.
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