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Prediction market operators and related firms are pushing back on a Commodity Futures Trading Commission proposal that would tighten rules around affiliated trading arms on prediction market exchanges.
The debate centers on how far the CFTC should go to address conflicts of interest when an exchange and a market-making or trading affiliate are under the same corporate umbrella. No West Virginia-specific change was reported in the latest round of public comments, but the outcome could shape how federally regulated prediction markets operate in the US.
Operators challenge order-book and separation rules
According to public comments summarized by Sportico, the CFTC proposal would require affiliated trading entities to be independently surveilled and limited to bona fide market-making roles rather than being banned outright.
A major point of opposition is a proposed rule that would force affiliated firms to receive last priority at every price in the order book, regardless of when their orders were entered. Underdog, Novig, Fanatics and DraftKings submitted comments criticizing the proposal, with several arguing it would reduce liquidity, add operational burdens and potentially exceed the CFTC’s authority under the Commodity Exchange Act.
Underdog chief legal officer Nick Lundgren wrote that mandatory subordination would impose “substantial burdens” while adding little to the agency’s stated goals. DraftKings Market Making said the rule could leave firms with a choice between ending market-making operations or restructuring to avoid affiliate status under the proposal.
Novig also objected to a requirement that exchange and trading-desk staff work in separate offices, arguing digital controls could address integrity concerns without that step.
Industry comments split on how strict the CFTC should be
Not every company opposed the idea of tighter safeguards. Polymarket said it supports the proposal and noted it does not have an active affiliated trading arm. Kalshi opposed order-book subordination but said it would accept a cap that limits its affiliated trading arm to 5% of quarterly exchange volume.
Some firms urged the CFTC to go even further than its current proposal. CME Group and Cboe Global Markets told the agency an outright ban on affiliated trading arms would be preferable to a limits-based approach. Sporttrade suggested a 20% cap on an exchange’s direct or indirect ownership of any market-making entity trading on its venue.
The comment period on the conflicts proposal has now closed. Sportico reported the CFTC is expected to spend the next two months considering feedback before deciding whether to revise or finalize the rule.
For West Virginia readers, this remains a federal market-structure story rather than a reported change to any state-regulated sportsbook or casino offering.
More from playwv.com – CFTC settlement bars former White House worker from prediction markets after Kalshi profits – State AGs Challenge CFTC Over Prediction Market Rules and What It Could Mean for Gambling Oversight
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Source: As reported by Dan Bernstein.
