Sleeper Sues CFTC Alleging Unauthorized Interference
Key Insights
Sleeper alleges the CFTC unlawfully interfered with its NFA application for FCM status, needed to offer customers access to contracts made by a designated contract market (DCM).
The CFTC purportedly told the NFA not to approve Sleeper’s application due to concerns about certain types of derivatives listed on DCMs.
Sleeper CEO Nan Wang accuses the CFTC of "picking winners and losers" in the prediction markets space, presenting an unfair competitive hurdle.
Sleeper’s legal counsel, Josh Sterling, is also a candidate for CFTC chair and has been a vocal advocate for sports event contracts.
In-Depth Analysis
Sleeper, a fantasy sports app, has filed a lawsuit against the CFTC, claiming the regulator illegally blocked its application to become a Futures Commission Merchant (FCM). This status would allow Sleeper to offer its customers access to contracts made by a Designated Contract Market (DCM). The core of Sleeper’s argument is that the CFTC intervened with the NFA, the self-regulatory body that typically approves FCM applications, preventing them from granting Sleeper the necessary approval.
The complaint outlines that the NFA had informed Sleeper its application was complete and ready for approval, but the CFTC allegedly instructed the NFA to halt the process. Sleeper believes this interference stems from the CFTC’s concerns regarding derivatives listed on DCMs, even though Sleeper has not yet announced its partnerships with any specific DCMs. Sleeper argues that any concerns should be directed at the DCMs themselves, which undergo a rigorous CFTC-overseen application process.
Sleeper’s CEO, Nan Wang, stated that the CFTC’s actions create an unfair competitive environment. The legal battle also involves Josh Sterling, Sleeper’s lead counsel, who is under consideration for the role of CFTC chair. Sterling has been a proponent of prediction markets offering sports event contracts.
Other companies, like DraftKings and Underdog, have also pursued NFA approval. PrizePicks is the only major fantasy or sports betting business to have received NFA approval and CFTC registration.
FAQs
Q: What is a Futures Commission Merchant (FCM)?
An FCM allows customers access to contracts made by a designated contract market (DCM).
Q: What is the role of the National Futures Association (NFA)?
The NFA is a self-regulatory body for businesses offering commodity futures or swaps, and the CFTC has delegated responsibility for FCM approval to the NFA since 1984.
Q: What does Sleeper want from the lawsuit?
Sleeper is calling on the court to issue an injunction prohibiting the CFTC from interfering with the NFA’s decision and to declare Sleeper eligible to register as an FCM.
Key Takeaways
Sleeper’s lawsuit highlights the regulatory complexities and potential roadblocks for fantasy sports and prediction markets seeking to offer innovative financial products.
The outcome of this case could set a precedent for how the CFTC regulates the intersection of sports, fantasy sports, and financial markets.
The involvement of a potential CFTC chair candidate as Sleeper’s counsel adds another layer of intrigue to the legal battle.
Discussion
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