As sports betting companies, Native American gaming, and horse racing aim to protect their wagering turf as prediction market platforms continue to proliferate in the United States, a prominent expert on gaming law believes racing's pari-mutuel betting is better protected than those other forms of gaming.
Speaking at the Racing and Gaming Conference Aug. 10 in Saratoga Springs, N.Y., attorney and consultant Bill Gotimer said the Interstate Horseracing Act of 1978 that governs interstate commerce regarding pari-mutuel wagering on horse racing provides protection as it requires approval of host racing associations and state regulators for wagers to be placed on an event.
As litigation on prediction markets continues throughout the country, the federal Commodity Futures Trading Commission has taken the position that its oversight stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act and preempts state regulation of prediction markets. These platforms allow people to take money-backed positions on outcomes of upcoming events, including sporting events.
Gotimer said its tougher for the CFTC to make its argument relative to pari-mutuel wagering because of the IHA, which also is federal legislation.
"It's been around since 1978, and what it effectively does is it gives the racetracks and racehorse owners a seat at the table for any discussion as to who can accept wagering on their product," Gotimer said. "It probably did not foresee prediction markets as we have now, but it did foresee the fact that (tracks and participants) had an economic stake in who could accept wagers.
"So I think there is a legal block right now on the prediction markets taking wagering action or 'contract action' on the outcome of races."
Gotimer believes some prediction markets attempted to offer action on this year's Kentucky Derby (G1) but were rebuffed and backed away. Attorney Kim Copp, who served as panel moderator, said Polymarket briefly offered action on this year's Derby but shut that down after a call from Churchill Downs Inc.
"For the time being (prediction market propositions on specific races) is illegal because there's a federal law that is not subject to preemption by another federal law."
Panel participants noted that prediction markets likely could offer propositions on who might win an Eclipse Award or finish as the year's highest-earning jockey. They noted if racing received some financial benefit, it might even embrace such wagers.
Things most assuredly are not sorted out. Copp found 45 active cases that either involved prediction markets suing states, states suing prediction markets, or the CFTC suing some states.
Derril Jordan, an attorney speaking on behalf of Native American gaming, believes those outlets also have federal protection and prediction markets are infringing. He noted that typically he's battling against state regulators, but this time he's aligned with them.
"I've spent most of the time fighting states, now I find myself cheering them on," Jordan said.
At one point panelists were asked if perhaps states and the CFTC could regulate prediction markets. Dan Ullman, who currently advises clients on crypto, fintech, and gaming and previously worked 16 years at the CFTC, thought about the question but ultimately didn't weigh in.
"If it were simple," Ullman said. "There wouldn't be so much litigation over it."
