“Sports betting is really the only industry in the country that regularly limits and bans their power users,” Jacob Fortinsky told attendees at Consensus Miami 2026 on Thursday. The co-founder and CEO of Novig, a sports betting platform that runs on prediction market rails, announced his company will transition this summer from a sweepstakes product available in 35 states to a federally regulated Designated Contract Market framework, opening operations to all 50 states.
The announcement lands amid an escalating regulatory turf war between federal agencies and state gambling commissions, with at least 15 active lawsuits now shaping who controls event-based contracts in America. Fortinsky’s pitch is simple, if radical: sports bets are binary financial instruments that belong under Commodity Futures Trading Commission oversight, not state casino boards.
The Structural Problem With Legacy Sportsbooks
Adam Mastrelli, founder of 57 Maiden (a firm that builds AI-driven trading strategies for prediction markets), showed up at Consensus with a personal grievance. “My partner and I got kicked off of two big sportsbooks within two months of trading because we were sharp,” he said. The comparison he reached for was deliberately absurd: it’s like “LeBron James getting kicked out of the NBA for being too good.”
The practice is not unusual, and that’s precisely the point. Traditional sportsbooks profit from recreational bettors who lose more than they win. A bettor who consistently beats the house signals that the book’s lines are exploitable, and the rational response under the legacy model is to show that person the door. This creates a bizarre market structure where success is punished rather than rewarded.
Fortinsky characterized the sportsbook industry as sitting on a $2 trillion global asset class “still dominated by these legacy casinos.” The business model, he argued, is structurally broken because it conflates skilled trading with cheating. State gambling regulators, in his telling, are complicit. When Novig attempted to get licensed at the state level in Colorado, regulators delivered what Fortinsky called a “wake-up call.” He paraphrased their message: “You’re naive if you think we care about consumer protection or innovation or market efficiency. We really just care about our tax revenue.”
Whether that paraphrase is fair to Colorado officials is unknowable from the outside, but the underlying tension is real. State gambling commissions derive revenue from licensed operators. A federal framework that bypasses state licensing threatens that income stream directly.
What a DCM Framework Actually Means
A Designated Contract Market is an exchange authorized by the CFTC to list derivatives contracts. The Chicago Mercantile Exchange is a DCM. So is the Intercontinental Exchange. Prediction market operator Kalshi secured DCM status in 2020, which is what allowed it to offer event contracts, including on elections, weather, and economic indicators, to retail customers nationwide.
Novig’s plan is to use the same legal pathway for sports. Under a DCM framework, a bet on whether the Lakers beat the Celtics is not a wager placed at a casino; it’s a binary options contract cleared through a regulated exchange. The distinction matters for tax treatment, for where the platform can operate, and for how winning traders are handled.
Fortinsky framed sports event contracts as binary financial instruments “that for so long have been treated as a gambling product and instead should really be treated as a financial product.” The framing is self-interested (he runs a company that would benefit from this classification), but it’s also not novel. Financial economists have long noted that sports betting and financial derivatives share structural similarities: both are zero-sum contracts with well-defined payoffs and probabilistic pricing.
The catch is that CFTC jurisdiction over sports contracts is contested. States argue that sports betting falls under their gambling authority. The CFTC argues that event contracts are derivatives and therefore federal turf. This dispute has metastasized into litigation. Fortinsky cited 15 pending lawsuits involving the CFTC, Kalshi, Robinhood, and various states.
That number tracks with recent coverage. Wisconsin became the fifth state sued by the CFTC in April after it filed its own complaint against Kalshi, Polymarket, Coinbase, and others, alleging illegal gambling. Washington state took aim at Kalshi in March with a separate lawsuit. The jurisdictional fight is real and escalating.
Fortinsky predicted the conflict will reach the Supreme Court “in the next two or three years.” That timeline is speculative, but if even one of the 15 pending cases results in a circuit split on whether the CFTC has exclusive authority over event contracts, Supreme Court review becomes plausible.
57 Maiden’s Edge Decay Problem
Mastrelli’s appearance at Consensus offered a counterweight to any suggestion that prediction markets are a money-printing machine for sophisticated traders. After getting banned from traditional sportsbooks, his firm turned to Novig, which he said charges no fees and allows traders to create synthetic positions. The infrastructure sounded attractive. The results were sobering.
Of 154 proposed trading strategies his team developed, only three currently run profitably. “This edge will go away,” Mastrelli said. “So if you can build systems that can keep up with that edge and that alpha… then it becomes really, really intriguing.”
That ratio, roughly 2% of strategies surviving, reflects a market that is maturing faster than many participants expected. Prediction market lines now incorporate information efficiently enough that edges are thin and fleeting. Mastrelli’s most profitable season, he noted, was the WNBA, a league with less liquidity and less attention from sophisticated traders than the NBA or NFL. Edge often lives in obscurity.
Mastrelli compared the prediction market landscape to institutional equities trading: “When I see a robust equities market now, this is AQR against SIG. It doesn’t go away.” The implication is that prediction markets are professionalizing into a structure where large quantitative firms compete against each other on razor-thin margins, not a frontier where scrappy traders can reliably exploit mispriced lines.
He said his firm avoids offshore platforms entirely. The comment was brief but worth noting. Offshore sportsbooks and prediction markets (Polymarket, for example, operates from a non-US jurisdiction) face persistent uncertainty about whether US customers can legally use them. A trader building institutional-grade infrastructure would reasonably prefer CFTC-regulated venues with clearer legal standing.
Why Sports Contracts Might Be the Safest Prediction Market Vertical
Fortinsky made an argument that sounded counterintuitive at first: sports is “actually the safest vertical” within prediction markets. The reasoning has to do with manipulation and insider trading.
Political prediction markets carry obvious risks. Candidates, campaign staff, and donors have material non-public information about strategy, health, endorsements, and withdrawals. Event contracts on economic data (will inflation exceed X?) or corporate actions (will Tesla announce a stock split?) also involve asymmetric information. Someone always knows before the market does.
Sports outcomes, by contrast, are publicly verifiable and occur in controlled environments with extensive media coverage. Referees can be bribed, of course, and athletes can shave points, but these risks are well-known and heavily policed by leagues. The information asymmetry is smaller than in political or economic event contracts.
Kalshi learned this lesson the hard way. In April, the platform suspended three politicians for betting on their own campaigns, underscoring the insider-trading problem inherent in political markets. A Virginia Senate candidate, a Minnesota state lawmaker, and a Texas House hopeful all faced fines for exploiting their own private information. Sports markets lack that particular failure mode.
That doesn’t mean sports contracts are risk-free. Match-fixing exists. Injury information can leak. But the attack surface is arguably narrower than for political contracts, where the “insiders” are the literal subjects of the bet.
The Bigger Picture: Regulatory Fragmentation
The prediction market industry sits at a strange inflection point. On one hand, demand is clearly growing. Platforms like Kalshi, Polymarket, and now Novig are attracting both retail traders and institutional interest. On the other hand, the legal framework is a mess. The CFTC believes it has authority. States believe they do too. Congress has not clarified the matter. Courts are deciding piecemeal.
The Senate Banking Committee’s upcoming markup of the Digital Asset Market Clarity Act on May 14 may offer some guidance on how crypto and derivatives markets interact, but prediction markets are not the primary focus of that legislation. Event contracts remain a regulatory orphan, fought over by agencies that each have plausible claims but no clear mandate.
Fortinsky’s strategy, transitioning to a federal DCM framework while the legal battle plays out, is a bet that the CFTC will ultimately prevail or at least maintain enough authority to operate nationally. If states win the jurisdictional fight, Novig’s federal license could become worthless outside the handful of states that voluntarily recognize CFTC event contracts.
The 15-lawsuit backdrop makes the bet risky. But Novig is not alone. Kalshi has been fighting this fight for years. Robinhood’s involvement (cited by Fortinsky as a party to the litigation) suggests that larger financial players see opportunity in the space. The funding rates and open interest on crypto perpetuals show how much capital flows to derivative markets with clearer rules; if sports event contracts achieve similar regulatory clarity, the market could scale rapidly.
What Novig’s Transition Means for Bettors
For the average bettor, the practical upside is straightforward: no more getting banned for winning. A DCM-regulated exchange cannot kick off profitable traders without violating its obligations as a neutral marketplace. The exchange model, where Novig presumably takes a small fee or spread rather than holding the opposite side of every bet, aligns the platform’s interests with volume rather than with user losses.
Mastrelli’s 57 Maiden experience suggests the edge will be harder to find as more sophisticated players enter. That’s a feature, not a bug, from a market-efficiency perspective, but it means retail bettors expecting easy profits will be disappointed. The platform becomes a place to express a view on a sporting event, not a place to reliably extract alpha unless you’re running institutional-grade models and even then, only 2% of those models survive.
The tax treatment may also differ. Gambling winnings and derivatives gains are taxed differently under IRS rules. Bettors considering a move to DCM-regulated platforms should consult a tax professional, as the classification of their gains may change based on the platform’s regulatory status. Our crypto tax guide covers some of the basics, though prediction market-specific guidance remains murky.
The Road to the Supreme Court
Fortinsky’s two-to-three-year timeline for Supreme Court review is optimistic but not implausible. The 15 lawsuits he cited are spread across multiple circuits. If the Fifth Circuit rules that the CFTC has exclusive jurisdiction over event contracts and the Ninth Circuit rules the opposite, the resulting circuit split would almost certainly attract Supreme Court attention.
The outcome would have implications far beyond sports betting. A ruling that the CFTC controls event contracts nationally would entrench prediction markets as a financial product category, potentially opening doors for contracts on everything from box-office receipts to concert attendance to weather events. A ruling favoring state authority would balkanize the market, forcing platforms to navigate 50 different licensing regimes or restrict operations to CFTC-friendly states.
For now, Novig is proceeding as if federal authority will hold. The summer transition will be the first major test of whether a sports-focused platform can scale nationally under DCM rules. Mastrelli’s 154 failed strategies are a reminder that the financial opportunity, while real, is not a given. The market is maturing, edge is decaying, and the legal fight is far from settled.
