Sports Event Contracts And The Risk Of Information Leakage

Sports event contracts have exploded in popularity since December 2024, when the first prediction market began offering contracts on whether the Chiefs or Eagles would win the Super Bowl. Today, prediction markets offer event contracts on everything from the World Cup to baseball, and even niche sports like chess and cricket.

These contracts let users trade on both the outcomes of games and on in-game events, such as the number of goals scored. They have attracted both retail users looking to speculate on sporting events, and sports-adjacent companies using the contracts to hedge risks tied to those events.

Beyond the risk that athletes and insiders will profit from events they can control, prediction markets create a new risk that sports betting does not: information leakage.

Trading on the outcome of sports events poses several risks for leagues, teams, and others in the industry. First is the risk that athletes or other insiders will trade on non-public information for personal gain. Second is the risk of manipulation: Players may alter their performance, or referees their calls, to affect the value or outcome of an event contract. Neither risk is new.

Because sports betting has long been available, players and other insiders have always had the ability to profit improperly, whether by betting on games where they hold non-public information about the outcome or by rigging the result in their favor.

Beyond the risk that athletes and insiders will profit from events they can control, prediction markets create a new risk that sports betting does not: information leakage. Because trading data on prediction markets is public, trading on inside information can cause confidential information to leak out.

A front-office executive placing trades on which team a star athlete will join next, for example, could inadvertently reveal trade talks or free agency negotiations, generating media attention, and shifting bargaining positions. Likewise, a team doctor who trades ‘the under’ (that a player will finish below the posted line) on a player’s point total could signal that the player is injured, exposing sensitive medical information.

Prediction markets and the CFTC prohibit insider trading

When athletes have misused inside information to place bets, or rigged games so that they, their family, or their friends could win, the Department of Justice (DOJ) has responded with fraud charges. Three such cases have been brought in the Eastern District of New York.

In October 2025, for instance, the DOJ indicted current and former NBA players for wire fraud in a sports betting conspiracy built on allegedly sharing confidential information about upcoming games, including medical and player-performance information, so that individuals could place wagers. The case is United States v. Earnest and, to date, two of the six defendants have pleaded guilty.

In November 2025, the DOJ indicted two MLB players for allegedly rigging their pitches in professional baseball games to profit on wagers. The case is United States v. Clase de la Cruz, and both defendants have pleaded not guilty. And most recently, in June 2026, the DOJ indicted two former NBA players and an agent for a scheme in which the player allegedly manipulated his performance to let others profit through illegal gambling. The case is United States v. Beasley and, so far, three defendants have pleaded not guilty, while the remaining defendants are awaiting arraignment.

Like those who use sportsbooks to place insider bets, insiders who exploit sports event contracts for personal benefit risk criminal fraud charges. But because an event contract is a derivative regulated by the Commodity Futures Trading Commission (CFTC), they may also face civil penalties for violations of the Commodity Exchange Act and the CFTC’s rules.

CFTC civil enforcement actions carry a lower burden of proof than criminal charges, making it easier for the agency to establish CEA violations. This gives federal regulators an additional tool to protect the integrity of sporting events, one unavailable when information is misused to place bets with sportsbooks, which are not federally regulated.

Under the CEA and CFTC Rule 180.1, individuals may not trade on material non-public information in breach of a duty owed to the source of that information, which is often referred to as the “misappropriation theory” of insider trading.

Beyond regulatory oversight, prediction markets can police insider trading through their own exchange rules, and all CFTC-regulated markets have taken a strong stance against it.

The government commonly alleges that a duty to the source of the information is established through confidentiality and non-disclosure agreements. Thus, where leagues, teams, and vendors enter into such agreements, Rule 180.1 can be used to charge trading on information obtained in the course of those employment or agency relationships without the authorization of the source of the information.

It can also be used to charge insiders for passing, or tipping, that information to others so they can trade on it. An NFL player or coach who has signed a confidentiality agreement and who knows the team’s first offensive play will be a run, for example, may not pass that information to friends, family, or anyone else for the purpose of trading.

However, because the misappropriation theory requires a breach of duty to the source, this conduct may fall outside Rule 180.1 if teams or players have no confidentiality or non-disclosure agreements that restrict how information can be used.

Rule 180.1 could also reach the manipulation of sporting event outcomes, which is a particular concern in events where a single individual has control over the result. Where there is a particularly high risk of manipulation, the CFTC may prohibit the platform from listing the contract. Earlier this year, the CFTC issued guidance to prediction markets advising them that contracts whose outcome is controlled by a single individual, or a small group, may not satisfy the requirements of the CEA.

Both the CFTC and the DOJ can bring enforcement actions for CEA violations, and recent activity shows that regulators are paying attention. No case has yet involved sports event contracts, but the agencies have already brought two prediction market insider trading cases: one against a U.S. Army soldier for trades related to the U.S. military operation to capture then-Venezuelan President Maduro, and another against a technology company employee for trading on confidential search result information.

Given the popularity of sports contracts, it may only be a matter of time before regulators turn their attention there, as well.

Exchanges are policing insider trading

Beyond regulatory oversight, prediction markets can police insider trading through their own exchange rules, and all CFTC-regulated markets have taken a strong stance against it. For sports event contracts in particular, many markets have simply barred certain groups likely to hold material non-public information from trading those contracts.

One operator, for example, prohibits the following categories of individuals from trading in World Cup contracts:

• Players, coaches, managers, and on-field technical staff;
• Officers, employees, contractors, and agents of the governing body (e.g., FIFA or UEFA) and its official statistics providers or data partners;
• Match officials, including referees, assistant referees, or video assistant referees; and
• Immediate family members and household members of any above individuals.

While the CFTC cannot enforce these exchange prohibitions directly against individuals, it can hold exchanges accountable for enforcing their own rules and could, if they are ignored, charge them for failing to enforce the terms and conditions of their own rulebooks.

Conclusion

Athletes and officials misusing information or manipulating outcomes for personal gain is nothing new. From the Black Sox Scandal of 1919 to the recent allegations against U.S. professional athletes, leagues and teams have always had to guard the integrity of the game against bad actors. Prediction markets present a new opportunity for abuse, but both the CFTC and the markets themselves have shown that they take insider trading seriously and will actively pursue enforcement actions when it occurs.

Originally published by Reuters Legal News, 29 July 2026