That Doesn't Mean You're Breaking Federal Law": The CFTC's Top Enforcer Just Described the Gap Every Sports Contract Lives In

Editor's note: TrueEdge builds odds and prediction-market tools and earns affiliate commissions from licensed sportsbooks. We have argued in labelled commentary against criminalising federally regulated exchanges. Weigh this piece with that in mind.

David Miller, the CFTC's director of enforcement, was asked on stage at the NEXTPredict conference in New York on Thursday whether Nicolás Maduro could legally have bought a contract on his own capture after seeing American helicopters overhead. His answer, per Covers: the trade might violate the exchange's rules, but "that doesn't mean that you're breaking federal law."

Miller made a lawyer's distinction, and it was correct. It also explains, more plainly than any regulator has before, why sports event contracts are a harder insider-trading problem than election or commodity contracts. In those markets the question is whose information it was. In sports, the question that matters is whether the person trading can change the result. Federal law is built to answer the first question.

What Miller actually said

He did not go easy. The session opened, per NEXTPredict's live blog, with his "Short answer: They do, and we are on the job policing fraud." He warned campaign staff trading on internal polling that "odds are you're misappropriating that information and you're committing insider trading." To NEXT.io he added: "We're going to look at that and we'll come after you." He defended the $65,000 settlement with Gabriel Perez over Kalshi's mention markets, and he wants large offshore venues serving Americans to register, so that "the FTXs don't happen again."

The framework underneath all of that dates from his March 31 speech at NYU, as summarised by Sullivan & Cromwell. Section 6(c)(1) of the Commodity Exchange Act and CFTC Rule 180.1, modelled on the SEC's Rule 10b-5, prohibit insider trading on event contracts because those contracts are swaps. Liability needs material non-public information, a breach of a duty "of trust and confidence owed to the source of the information," and intent. Then the sentence that matters most here: "in our markets, you are absolutely entitled to trade on MNPI that you rightfully own."

That is how commodities law has always worked. A grain elevator knows its own crop and hedges on that knowledge; Miller used the same comparison on Thursday. Maduro, in his example, owes nobody a duty about his own whereabouts, so trading on them is unseemly but is not misappropriation.

Where sports breaks the model

Now apply it to a basketball player. A player who knows he will play 21 minutes tonight instead of his usual 33 has information that nobody else has. Whether he "rightfully owns" it is the open question. A team or league could argue that its employment contract and integrity policy create the duty, and in most cases that would probably work. But the federal case is then about the breach of duty, and it turns on what an employment document says, not on what the trade did to everyone on the other side.

The criminal case ESPN reported on Wednesday shows what a gaming statute asks instead. Clark County prosecutors have charged Steven Vasquez, a former Fresno State and San Jose State player, and Matthew J. Martin, a former DraftKings sports trader, with Class C felonies: committing a fraudulent act in a gaming establishment and attempting or conspiring to cheat at a gambling game. The allegation is that unders on Mykell Robinson's statistics were bet at a Las Vegas sportsbook before Fresno State's January 7, 2025 game against Colorado State, in which Robinson played 21 minutes against a 33.5-minute season average and scored three points. Martin won $15,950, per records ESPN obtained. A warrant is out for Robinson. Vasquez and Martin have pleaded not guilty. Martin's lawyer, Crane Pomerantz, said his client "looks forward to proving his innocence in a court of law." DraftKings says the betting "did not occur on DraftKings' platform."

Read the counts. Nevada's question is whether someone cheated at a gambling game. It does not ask who owed a duty to whom. If the same trade had been placed on a federal exchange, the government would need either a misappropriation theory or a manipulation theory. The second probably fits a deliberate under-performance. The first is less certain when the trader is the player himself.

Two other cases sit squarely in the gap. Courtsiding, where someone in the arena trades on a point before the data feed updates, uses information that person saw with their own eyes and owes to nobody. Jenni Kennedy of the International Tennis Integrity Agency told the same conference that courtsiding is now linked to prediction markets, which settle instantly, and called it "a serious concern for us both from a welfare perspective." Injury contracts are the other. In March Miller himself named contracts about "the actions or status of a person or small group of people" as presenting "both manipulation and insider trading risk." A coach deciding on Tuesday who will sit on Sunday is that small group.

The strongest case that this gap does not matter

The best counterargument has three parts, and each is mostly right.

The first is that fixing is manipulation. Miller said on Thursday that manipulation remains prohibited, and that false statements meant to move a contract's price can be manipulation even where trading on the underlying information is legal. A player who shaves minutes to cash an under is manipulating the event the contract settles on.

The second is that prosecutors do not depend on the CFTC. Master Sgt. Gannon Ken Van Dyke was indicted in Manhattan in April on wire fraud and commodities fraud, among other counts, over roughly $400,000 in Polymarket profits on the Maduro operation, alongside a CFTC civil case. Terry Rozier's federal prosecution, set for trial on February 8, 2027, is a wire-fraud case about sportsbook bets. Federal prosecutors have tools beyond Rule 180.1.

The third is that exchanges close the gap themselves. Kalshi said in March that it would screen athletes, coaches and officials at registration through IC360 and block them from their own sports. Matthew Kulkin of WilmerHale, a former CFTC official, called exchanges "the first line of defense." Kalshi has fined and suspended three candidates for trading on their own races.

All three are fair, and together they cover the obvious fix. They do not cover the cases in between: the courtsider, the trainer, the friend of the player who did not have to be told, the coach who knows the injury news a day early. In those cases the answer to "is this illegal" depends on an exchange rulebook and a league contract, not on a statute. Miller said exactly that about Maduro: breaking an exchange's rules can mean fines or a suspension without being a federal crime.

Why it matters for the state fight

We argue that states should not criminalise federally regulated exchanges. Thursday's answer was honest, and it hands the states an argument they will use. Ohio's regulator, whose new licensee letter we covered today, says sports contracts are gaming. Nevada's statute shows what gaming law offers that commodities law does not: a cheating offence that does not care who owed a duty to whom.

The federal answer is not to give up event contracts on sports. It is to write the sports-specific rule Miller's framework does not have. The CFTC has an open rulemaking on event contracts, with comments due November 18. A rule that makes trading by people able to affect a sporting result a violation in itself, whatever the duty analysis says, would cover the courtsider and the trainer, and it would answer the strongest point any attorney general has. If the final rule leaves the matter to exchange rulebooks, the states will be right on this point, and they will say so in court.