The once-distinct worlds of sports betting and stock trading are converging faster than ever — and at the center of this shift lies a controversial financial product known as event contracts.
In August, Robinhood (HOOD) announced plans to roll out event contracts tied to college and professional football games, letting users place yes-or-no wagers on outcomes like who wins a particular matchup. Just a day later, FanDuel (FLUT) revealed it would be expanding into the financial arena, offering contracts linked to asset prices — from stocks and bitcoin (BTC-USD) to oil and gold.
What Are Event Contracts?
Event contracts are binary in nature: users stake money on whether a specific outcome will occur. Examples include:
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Will the Philadelphia Eagles beat the Dallas Cowboys on September 4?
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Will gold close above $3,500 an ounce tomorrow?
If the outcome happens, the contract pays out; if not, it expires worthless. The simplicity of the product makes it attractive to both sports fans and retail traders — but also places it in a murky regulatory category.
A Product in Legal Gray Areas
Event contracts fall under the jurisdiction of the Commodities Futures Trading Commission (CFTC), while wagers are typically regulated by state gaming commissions and investments by the Securities and Exchange Commission (SEC). This unusual overlap leaves companies like Robinhood and FanDuel with flexibility — but also exposes them to growing scrutiny.
“The product that you are going to see on prediction markets is already evolving very rapidly, and what you see this season could look completely different by the next NFL season, if not sooner,” said Joel Simkins, founder of XST Capital Group and a longtime gaming-industry analyst. “You have to ask yourself, where does this stop?”
The American Gaming Association (AGA) has argued that event contracts tied to sports are essentially a form of gambling and should be regulated as such. AGA president Bill Miller has criticized the practice as exploiting “financial loopholes” rather than following established gaming rules.
Major sports leagues share those concerns. In a May letter to acting CFTC head Caroline Pham, the NBA warned that “the integrity risks posed by sports prediction markets are more significant and more difficult to manage than those presented by legal, regulated sports gambling.”
Legal Battles Already Underway
The tension has already spilled into courtrooms. On the very day Robinhood announced its event contracts, the company filed lawsuits against gaming regulators in Nevada and New Jersey — two states central to the U.S. gambling industry — accusing them of attempting to block its products.
In its complaint, Robinhood argued that allowing states to impose restrictions would “infringe on the CFTC’s exclusive jurisdiction and fracture what Congress intended to be a uniform set of regulations for commodity futures and swaps trading.”
The outcome of these legal battles will be critical in determining whether event contracts evolve into a mainstream financial tool, or are forced into the same tightly regulated framework as sports gambling.
For now, Robinhood and FanDuel are pushing ahead, positioning themselves at the crossroads of two multi-billion-dollar industries — betting that consumers want a future where trading stocks and wagering on football feel like two sides of the same coin.
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