Abstract:
The National Basketball League (NBA) announced on October 26 that it has reached a multi-year cooperation agreement with prediction market platforms Kalshi and Polymarket, and signed a memorandum of understanding with the U.S. Commodity Futures Trading Commission (CFTC), planning to establish a regulatory and integrity protection framework for the NBA event prediction market. Through this arrangement, the NBA hopes to strengthen the monitoring of abnormal transactions, the use of inside information and the risks of event manipulation in the context of the rapid expansion of the prediction market, while at the same time integrating such markets into a clearer business cooperation system.
According to the agreement announced by the NBA, Kalshi and Polymarket will become the league's "preferred prediction market trading platform." The two companies will obtain relevant rights to use the NBA's intellectual property, including the use of the league's logo in the U.S. market, conducting marketing activities and promoting through different media channels. In addition, the two platforms will also receive event data provided by Sportradar, the official data distribution partner of the NBA, for the operation and settlement of NBA-related prediction markets authorized by the league.
Prediction markets allow users to trade on the outcomes of future events. For example, participants can buy and sell contracts around events such as whether a certain team wins a game or whether a certain event produces a specific result. Contract prices usually change as market participants judge the probability of events, so they have the attribute of predictive information and also involve financial risks. In recent years, with the rapid development of platforms such as Kalshi and Polymarket, sports events have become an important trading area in such markets.
The NBA stated that the agreement reached with the two platforms will include a number of integrity protection measures. First, the alliance will set limits on what event contracts the platform can provide and retain the right to approve relevant market types. Second, platforms need to share information about investigations and suspicious transactions with the alliance so that both parties can work together to identify activities that may involve insider trading, market manipulation or other violations.
The agreement also explicitly prohibits NBA league and team staff from trading contracts related to NBA events. This restriction is intended to reduce the risk of those with non-public information such as inside teams, player health or tournament schedules taking advantage of their information. For professional sports, the credibility of event results is not only related to the game itself, but also directly affects the commercial activities formed around the game.
At the same time, the memorandum of understanding signed by the NBA and CFTC will focus on regulatory cooperation and information sharing. The two parties hope to establish a more direct communication mechanism to more effectively exchange information and conduct investigations when abnormal activities occur in the prediction market involving NBA events. The CFTC is the agency responsible for regulating futures and some derivatives markets at the federal level in the United States. Whether prediction markets should be mainly regulated in accordance with financial derivatives rules or be subject to state gambling laws has been controversial in recent years.
This is also one of the important backgrounds of this agreement. In the United States, traditional sports betting is generally subject to state laws, and states vary in the scope of licenses, operating conditions and tax arrangements for legal betting. The prediction market platform contends that its trading products are federally regulated event contracts and therefore can operate in different states. Some state governments have objected to this, arguing that certain sports prediction products are substantially similar to gambling and should be subject to state-level gambling supervision.
Currently, more than a dozen states have launched legal disputes over the regulatory authority of prediction markets. The National Football League (NFL) recently asked the U.S. Supreme Court to review relevant regulatory issues, arguing that sports event contracts should be treated as gambling activities rather than just as financial market products. The CFTC believes that it has federal-level regulatory authority over the relevant markets. As the scale of prediction market transactions expands, this debate over the ownership of regulatory rights is expected to continue.
The NBA’s choice to establish formal partnerships with Kalshi and Polymarket reflects the league’s desire to manage this type of emerging business by directly participating in the formulation of rules, rather than relying entirely on external regulatory mechanisms. Scott Kaufman-Ross, the league's head of media distribution and partnerships, said as this market category continues to evolve, working with regulators and operators can help ensure relevant protections are in place while creating new ways for fans to engage.
In addition to establishing partnerships with two prediction market platforms, the NBA has also expanded its agreement with traditional sports betting partner DraftKings to include its prediction market business within the scope of cooperation and allow related businesses to be promoted across the United States. The NBA said it plans to further expand cooperation with other existing sports betting partners and industry companies in the coming weeks.
The league has recently placed restrictions on certain types of bets in sports betting markets, including which player will score first in a game, the outcome of a jump ball, and certain bets on players who are expected to play only a short amount of time. These limits are designed to reduce the risks posed by certain markets that are highly susceptible to a single move or insider information. Prediction market partners will also be subject to market rules consistent with the latest sports betting restrictions, the NBA said.
Such restrictions are of practical significance. Compared with the outcome of the entire game, some extremely segmented events are more likely to be affected by a single behavior. If the transaction involves a player obtaining a certain data for the first time after the game starts, or a very short period of the game, the inside information possessed by the relevant personnel may have a significant impact on the contract price. Therefore, restricting certain market segments helps reduce the room for manipulation.
In recent years, sports prediction markets have also received increasing attention due to insider information risks. The objects of prediction market transactions may involve politics, economics, public affairs, sports events and other fields, and the results of some events may be affected by a small number of people who possess non-public information. For sports leagues, if players, coaches or team staff use inside information to trade, it may not only damage market fairness, but also shake public trust in the integrity of the game.
This NBA agreement also involves the commercial relationship between players and prediction market platforms. Some NBA stars have already established cooperation with relevant platforms. For example, Milwaukee Bucks player Giannis Antetokounmpo once promoted Kalshi, and Philadelphia 76ers player LeBron James also recently signed a cooperation agreement with Polymarket. At the same time, San Antonio Spurs player Victor Vunbanyama publicly stated that he would not endorse such platforms.
There is a difference between player endorsements, league licensing and personal transactions. The NBA’s agreement clearly prohibits the league and team staff from trading NBA-related event contracts, but this does not mean that all players are completely prohibited from conducting commercial cooperation with prediction market platforms. Specific restrictions will still depend on the league rules, relevant contracts and applicable legal requirements.
The NBA did not disclose the specific financial terms of the agreement with Kalshi and Polymarket, only confirming that the cooperation period is multi-year. After the two platforms obtain the right to use official data and the alliance's intellectual property, they can more directly use event information for authorized market products, and at the same time use the alliance's official channels for promotion. For the NBA, this can not only create new business cooperation opportunities, but also enhance the league's ability to supervise related transaction activities.
However, establishing a cooperation framework does not mean that all risks have been resolved. Complex questions remain about how platforms identify unusual transactions, handle suspected insider trading, and divide federal and state authorities in cross-state regulatory disputes. Whether the information sharing mechanism between the alliance and the platform can operate effectively also needs to be tested through actual cases.
From the perspective of the development of the broader sports industry, prediction markets are becoming a new business model in addition to traditional sports betting. The NBA's choice to cooperate directly with major platforms is not only a response to the growth of market demand, but also an institutional response to the integrity risks of the event. In the future, whether this model can expand commercial revenue while maintaining competition integrity will depend on whether market restrictions, transaction monitoring and regulatory cooperation can be truly implemented.
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