Michigan Regulators Warn Sports Betting Operators to Stay Away From Sports Event Contracts

• The Michigan Gaming Control Board has sent a letter to licensed operators warning them that involvement in sports event contracts will not be tolerated
• The official letter warns operators it will consider involvement in sports event contracts as it continues to examine suitability for licensure
• Dustin Gouker of The Closing Line substack was the first to obtain the letter

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The Michigan Gaming Control Board has sent an official letter to its licensed sports betting operators warning them to stay out of the sports event contract market.

In an official letter first obtained by Dustin Gouker’s The Closing Line substack, Henry Williams, Executive Director of the Michigan Gaming Control Board (MGCB), warns operators that “any involvement in the offering of sports event contracts, directly or via an affiliate, key person, related business entity, or other association, will have implications relative to your licensure in Michigan.”

The regulator notes that the control board will take into consideration an operator offering sports event contracts in the state, and other jurisdictions, when determining continued suitability for licensure.

Do Not Offer Sports Event Contracts

The Michigan Gaming Control Board is the third regulatory body behind Arizona and Ohio to warn its licensed gaming operators to not offer sports event contracts, or partner with those who do, in its jurisdiction.

The letter was sent to all commercial casinos, gaming-related commercial casino suppliers, iGaming operators, iGaming suppliers, sports betting operators, sports betting suppliers, and fantasy contest operators in the state.

Williams warned the licensed operators that the following conduct will be considered by the commission when deciding on continued suitability for licensure in Michigan:

• Directly or indirectly operating, offering, or facilitating access to sporting event contracts in Michigan without approval from the MGCB
• Partnering, coordinating, or associating with an entity that operates, offers, or facilitates access to sporting event contracts in Michigan
• Directly or indirectly operating, offering, or facilitating access to sporting event contracts in any jurisdiction other than Michigan that has forbade sports event contracts
• Partnering, coordinating, or associating with any entity that operates, offers, or facilitates access to sports event contracts in any jurisdiction other than Michigan that has forbade sports event contracts

“The Michigan Gaming Control Board understands that certain licensees may be considering opportunities to operate, offer, or facilitate access to prediction markets, where individuals can buy, sell, and trade event contracts that are based on a future event, occurrence, or value. The MGCB further understands that many of these prediction markets would offer sporting event contracts – event contracts in which an individual acquires a position on the outcome of a sporting event or other occurrence related to a sporting event – and would not operate in accordance with state gaming laws or pursuant to state-issued gaming licenses,” Williams wrote.

Several Licensed Michigan Operators Have Explored Sports Event Contracts

The letter could certainly have implications for several Michigan gaming operators.

DraftKings has made no secret that it is currently monitoring involvement in the prediction markets. DraftKings CEO Jason Robins and Co-Founder Paul Liberman, along with several other DraftKings C-suite executives, applied in June with the National Futures Association as Gus III Holdings LLC, a key preliminary step for a company hoping to receive regulatory approval from the Commodity Futures Trading Commission to be licensed as a futures and derivates markets.

Gus III Holdings LLC is currently labeled as a “pending NFA member” on its application on the NFA website.

FanDuel has also maneuvered itself into potentially offering prediction market contracts. The company announced in August a new partnership with CME Group, a leading derivatives marketplace, to launch new products and expand access to financial markets for FanDuel customers. The companies will develop new event-based contracts with defined risks, according to the official announcement.

The products will be available on a FanDuel platform later this year.

Underdog, which offers its draft daily fantasy sports competitions in Minnesota, currently offers prediction markets – including sports event contracts – in the state. Underdog entered the prediction markets last month after entering in a partnership with Crypto.com.

When asked by Sports Betting Dime, an Underdog spokesperson had no comment on the letter.

Finally, PrizePicks, which offers its streak daily fantasy sports competitions, but no real money games, in the state, received National Futures Association (NFA) approval in late September, and is now registered as a Futures Commission Merchant. PrizePicks is the first to receive NFA approval out of a group of gaming company applicants that includes Underdog, DraftKings, and Fanatics Betting and Gaming.

The designation allows PrizePicks to accept orders from it members to buy and sell futures contracts offered by designated contract markets that are regulated by the Commodity Futures Trading Commission.