Blurred Lines: Stocks, Crypto & Sports Betting Converge
Published:
Jan 31, 2025
,
06:32 p.m.
ET
Updated:
Feb 4, 2025
,
03:16 p.m.
ET
Key Points:
Stock and cryptocurrency trading platforms have unveiled sports betting-like products
Significant questions surround the legality and potential regulations involved
Sports betting through these trading platforms is available in all 50 states, while sportsbooks like FanDuel and DraftKings are limited to the 38 states that have legalized it
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Sports betting is one of the fastest-growing types of gambling since the Supreme Court ruling in 2018 that allowed states to legalize it on an individual basis. Sports betting has infiltrated numerous other industries such as social media, TV, radio and live events, but has now extended its reach even further with its introduction into certain trading platforms used for stocks and cryptocurrency.
Crypto.com and Kalshi have launched their first ever sports event trading products that allows users to make “trades” based on their predictions of sporting events like the Super Bowl. These platforms are promoting that they offer sports betting trading products in all 50 states, not just the 38 states and District of Columbia that offer legalized, regulated sports betting. Whether or not this type of “investing” is truly legal is up for heated debate and will be examined here.
Trading platforms enter into the sports betting world
Crypto.com
Kris Marszalek, the co-founder and CEO of Crypto.com revealed that the trading platform recently boasted that they had launched sports event trading in all 50 states. This allows users to make trades based on their prediction on the outcome of certain sporting events. Crypto.com was the first trading platform to offer this type of product in the U.S.
Kalshi
Kalshi, a licensed prediction market provider, recently followed the lead of Crypto.com and began offering event-based market options for sporting events. Kalshi’s CEO Tarek Mansour also spoke of the company's success in winning a case against the Commodity Futures Trading Commission (CFTC) regarding trading of contracts on political elections. This established a way for those in the U.S. access to a form of political-based betting ahead of the 2024 election.
Industry veteran Kim Lund pointed out via a post on LinkedIn that Kalshi has yet to mention Responsible Gaming or any efforts to reduce gambling harms:
Is Robinhood next?
Robinhood has had considerable notoriety after choosing to freeze trading on Gamestop stock in January 2021 and is now exploring the possibility of joining other popular trading platforms looking to capitalize on sports betting. CEO Vlad Tenev stated the company is keenly looking into events contracts to dip their toe into sport event trading, but nothing has been confirmed as of yet.
UPDATE (2/3/25):
Robinhood announced it has partnered with Kalshi to offer sports-based event contracts via its platform for the Super Bowl. The announcement detailed: "Today, Robinhood Derivatives, LLC (RHD) is launching event contracts for the Pro Football Championship, allowing eligible customers to place trades on the outcome of the upcoming showdown between Kansas City and Philadelphia. Event contracts for the Pro Football Championship are rolling out to all eligible customers starting today."
This news sent further shockwaves through the sports betting industry, knowing that Robinhood operates in all 50 states, and that the Super Bowl is the biggest single-game betting event of the year.
UPDATE (2/4/25):
Just a day later, Robinhood halted their sports-based event contracts offering, after they received a request from the U.S. Commodity Futures Trading Commission (CFTC). Robinhood said it was "disappointed by the outcome," adding, "We are heeding their directive to cease offering these contracts despite the fact that the CFTC has not deemed Kalshi's football championship contracts illegal," per Lucas Moskowitz, Robinhood's general counsel.
How can trading platforms legally offer sports betting?
Sports betting event trading is a CFTC-regulated derivatives trading feature. In a sports event contract, an individual can have a maximum of 2,500 open positions at one time. In early January 2025, the CFTC requested that Crypto.com suspend sporting event contract trading, but they have declined this request in favor of waiting for the new Trump administration to review standards. The acting chairwoman for CFTC Caroline Pham announced there will be a series of roundtable discussions on the evolving trends, including prediction market sports event contracts, to see where the future of this product will go and what regulations will surround it.
The confusion surrounding the legality of sport event contract trading is related to event contracts specifically not allowing “gaming” to be involved, which one would think includes sports betting and gambling, which are regulated by the states. Currently the limits of what gaming entails is not explicitly defined and therefore leaves sporting event contract trading in a gray area that requires more scrutiny. Platforms that utilize and promote prediction marketing argue that they have a different purpose than traditional sportsbooks that bet against the house. There is concern that this type of market activity could compete with existing sportsbooks, who pay handsome sums to state governments to offer their products to residents, along with sending millions in tax revenue to those states.
Will regulators crack down on this new form of unregulated sports betting?
The future of prediction markets and sport event contracts through trading platforms is very much up in the air. There are many pieces of the puzzle that need to be further defined before potentially becoming more heavily regulated. It is hard to determine what kind of influence the new presidential term will have on this form of unregulated sports betting, but early speculation based on the fact that Donald Trump Jr. is joining Kalashi as a strategic advisor following the outcome of the 2024 election, indicates that we can anticipate future support.
Are stocks, cryptocurrency day trading a form of gambling already?
While many may not think trading in the stock market or buying cryptocurrency as addictive or forms of gambling, they can also elicit the same emotional and psychological harm as gambling addiction. Both trading and gambling involve monetary risk, potential loss, unpredictability and oftentimes a dopamine release triggered when a successful bet or trade is made. The main difference between trading stocks and gambling is the “against the house” structure of betting versus the free market dynamics of trading.
Warnings signs of a day trading problem
Addiction to day trading may be difficult to spot, but there are signs one can look out for in themselves or loved ones.
Some signs of a day trading problem include:
Impulsive trading behavior
Preoccupation with trading activity
Neglecting other responsibility in favor of trading
Isolating from friends and family
Stress or anxiety around trading activity
Inability to stop trading even if you want to
If you or someone you know is exhibiting behaviors that may indicate a day trading or cryptocurrency addiction, there is help available. Depending on the severity of someone's behaviors inpatient treatment, outpatient services, support groups like Gamblers Anonymous (GA) or individual therapy may be helpful.
Additionally, Birches Health offers specialized virtual gambling addiction treatment that allows people to get help anytime, anywhere. To get started with Birches, you can take a free assessment to evaluate gambling behaviors, refer a friend or family member, call 833-483-3838 or email help@bircheshealth.com to get in touch directly with the Birches team.
