Developing The FTC's Reported Sportsbook Review Stops Exactly Where the President's Son's Portfolio Begins

Editor's note: TrueEdge builds odds tools and earns affiliate commissions from licensed sportsbooks, including the two named most often below. This piece argues a position on betting and prediction-market regulation. Weigh it accordingly.

Jeff Stein reported in The Washington Sun on Tuesday morning that staff at the Federal Trade Commission — political appointees and career lawyers both — are in preliminary discussions about the $167 billion online sports gambling industry, and that the likely focus is deceptive and misleading advertising by DraftKings and FanDuel. An FTC spokesperson declined to comment. DraftKings said it has not received a Civil Investigative Demand. FanDuel said it has heard nothing from the agency at all.

So: an early-stage review that the agency will not confirm and neither target has been served in. Hold that thought, because the part of the report that is actually load-bearing is a clause most write-ups buried. The review is expected to exclude Kalshi and Polymarket.

That is the story. Not because prediction markets deserve a federal investigation on the merits of a Tuesday — we have argued at length in this section that criminalising a federally licensed exchange is bad law — but because the reason for the exclusion does not survive ten minutes with the statute, and because of who is on the other side of it.

The FTC does not need a licence to have jurisdiction

The standard explanation for why a state cannot touch Kalshi is that New York, Ohio and Arizona regulate licensees, and Kalshi holds no state licence. We wrote that sentence ourselves on Sunday, at the end of a piece about New York's proposed Part 5404: New York is about to tell DraftKings it may not time a push notification, and it cannot tell an exchange anything at all. That is true of a gaming commission. It is a licensing body, and its authority runs to the people it licenses.

The FTC is not a licensing body. Its advertising authority comes from Section 5 of the FTC Act, which reaches "unfair or deceptive acts or practices in or affecting commerce" by essentially anyone engaged in commerce. We read the provision rather than a summary of it. The carve-out at 15 U.S.C. § 45(a)(2) is five entries long: banks; the savings and loan institutions described in § 57a(f)(3); the federal credit unions described in § 57a(f)(4); common carriers subject to the Acts to regulate commerce, plus air carriers and foreign air carriers; and persons insofar as they are subject to the Packers and Stockyards Act of 1921. The Commodity Futures Trading Commission is not in that list. Neither are commodity exchanges, designated contract markets, or the Commodity Exchange Act. A meatpacker gets an exemption from Section 5. A $22 billion derivatives venue running television advertisements for football contracts does not.

There is a real counter-text, and it belongs in the piece rather than in a footnote. The Commodity Exchange Act gives the CFTC "exclusive jurisdiction," at 7 U.S.C. § 2(a)(1)(A), over accounts, agreements and transactions involving swaps and futures on designated contract markets. If you want to argue the FTC should stay out, that clause is your argument. We think it is weaker than it looks for two reasons visible in the same sentence. The clause reaches accounts, agreements and transactions — the trade, the contract, the account. An advertisement is none of those. And the same provision expressly preserves the authority of the SEC and of other authorities under federal and state law, which is a strange thing for Congress to write into a displacement clause if displacement were meant to be total.

We will say what we do not know. We could not find an instance of the FTC bringing a Section 5 advertising case against a CFTC-registered contract market, and a first-of-its-kind theory is a genuine institutional risk for an agency, distinct from a jurisdictional bar. Agencies also practise comity; the FTC has historically trod lightly where another regulator is pervasively present. None of that is the same as "we cannot." The honest description of a decision to exclude Kalshi and Polymarket is that it is a decision.

Who benefits from that decision

Donald Trump Jr. became a paid strategic adviser to Kalshi in January 2025, with an equity stake reported at $300,000 when it was granted and worth considerably more now that the exchange carries a valuation around $22 billion. Seven months later he joined the advisory board of Polymarket, Kalshi's principal competitor. On September 1 his venture firm, 1789 Capital, led Polymarket's $1 billion funding round with $300 million of its own, at a $21 billion valuation.

He is therefore on both sides of the prediction-market rivalry and on neither side of the sportsbook business. A federal review that targets the sportsbooks and declines to look at the exchanges is, in its practical effect, a federal review of the competitors of two companies that pay the president's son. Brian Pempus made this point at GamblingHarm.org on Tuesday and we are not going to pretend it is unfair. It is the first thing a reasonable reader notices.

We are not asserting that anyone directed this. We have no evidence of that, nobody has alleged it on the record, and the review may not exist in any formal sense — David Clement of the Consumer Choice Center told Sports Betting Dime flatly that "it's not clear that an FTC investigation into online sportsbooks actually exists," and suggested the story may be "a wish-casting PR strategy" by advocates who want one. That caution is well placed. Two targets who have received nothing, an agency that will not comment, and a single outlet's sourcing is a thin foundation for anything.

But an unconfirmed review with a published scope still tells you what the scope is understood to be, and the people pushing for it are not outsiders. Jon Schweppe, quoted saying it is "time to put the online sportsbooks in the hot seat" and comparing them to Big Tobacco, Big Tech and Big Pharma, is a former senior policy adviser to FTC Chair Andrew Ferguson. When a former adviser to the chairman frames the target set in public and the target set has a hole in exactly one place, the hole is information.

The strongest argument for the exclusion, and why it fails on its own terms

Here is the best version of the other side, and it is not stupid.

A sportsbook and an exchange are different machines. A bookmaker sets the price, takes the other side, and makes money when the customer loses; it can and routinely does limit or close the account of a customer who wins. An exchange matches buyers to sellers and earns a fee whether the contract settles yes or no, and under the CFTC's impartial-access rule at 17 CFR 38.151 a designated contract market cannot bar a trader for being profitable. If the FTC's theory of harm is the house engineers your losses, there is a coherent reading on which the house is the thing being investigated and an order book is not a house. Polymarket's chief executive has made a version of this argument about a sportsbook "duopoly that caps and limits profitable traders," and on that narrow consumer-protection point he is right.

The reason it fails is that the reported theory is not about the business model. It is about advertising, and about documented rates of bankruptcy, hospitalisation and mental-health harm among users. Advertising does not care what the matching engine looks like. A thirty-second spot telling a 24-year-old man that this weekend's game is more interesting with money on it works identically whether the counterparty is a book's risk desk or another retail account in Ohio. If the harm being measured is what happens to the person who sees the advertisement, then the correct unit of analysis is the advertisement, and the exclusion is a category error dressed as a distinction.

The leagues reached that conclusion on the same day. The NBA and WNBA launched a joint campaign with the National Council on Problem Gambling on Tuesday — one week before the NBA season opens — whose central line is that "whether placing a sports bet or trading on a prediction market, both activities can put fans at meaningful risk when not done responsibly." Scott Kaufman-Ross and Colie Edison both framed it as helping fans make informed decisions. Two leagues with enormous commercial relationships on both sides of this fight, and with every incentive to avoid picking one, collapsed the distinction in a public-service campaign. The agency with nationwide authority over deceptive advertising is reportedly maintaining it.

What would change our mind

If the FTC confirms a review and its published scope includes prediction-market advertising, this piece is wrong and we will say so in this section. If the Commission issues anything — a 6(b) study order, a CID, a workshop notice — that explains the exclusion on comity grounds rather than on jurisdictional ones, that is a defensible answer and we would print it. And if the reporting itself collapses, which Clement thinks is live, then there is no review and nothing to criticise.

What will not satisfy us is the explanation nobody has yet offered in public: that the federal government cannot reach how a federally licensed exchange advertises. We checked. Five exemptions, and an exchange is not one of them.