Margin Trading Equates Crypto.com’s OG Prediction Market With Your Neighborhood Bookie
Offering leveraged trading on prediction markets is another step in the wrong direction of positioning gambling as investing.
Crypto.com’s unveiling of a new prediction market app that allows margin trading is causing angst throughout the sports betting community.
Announcing “OG, a new prediction market experience,” Crypto.com boasts, “This will be the first prediction markets platform to offer margin trading.”
Margin trading is basically trading with borrowed money. In sports betting parlance, it’s gambling on credit.
That’s the old-school, pre-legalization way to bet. Call your neighborhood bookie, or log on to your PPH offshore account (for which your neighborhood bookie is an agent) and place a wager. No deposit required. Lose, which you almost certainly will over the long term, and owe the man money.
This is how some bettors get themselves in too deep, gambling with money they don’t necessarily have.
Regulated sportsbooks, of course, are not allowed to let customers bet on credit, a standard and obvious pillar of responsible gaming regulations.
As a designated contract market regulated by the CFTC, Crypto.com is not forced to operate within these constraints, and it’s rightfully making people nervous.
Dangers of Leveraged Trading
Margin trading has led to billions of busted fortunes for thousands of traders. With crypto, wild swings in pricing are too common, and leverage turns routine volatility into massive losses.
Offering leveraged trading on prediction markets is another step in the wrong direction.
In its press release, Crypto.com also announced the first million users to sign up with OG receive up to $500 in rewards, a promotional ploy that feels very similar to sportsbooks bonusing new customers. Big players will also be enticed to play bigger, another tactic borrowed from sportsbooks.
Lack of CTFC Guardrails
In her farewell address as CFTC commissioner, Kristin Johnson warned about prediction markets opening this Pandora’s box:
… we have too few guardrails and too little visibility into the prediction market landscape. Because the target audience for these contracts is retail customers and some market participants seem to be marching down a path to offer leveraged, margined prediction market [contracts] to retail investors, there is an urgent need for the Commission to express in a clear voice our expectations related to these contracts.”
Mike Selig, who replaced Johnson, indeed expressed in a clear voice the CFTC’s expectations related to prediction markets — although it’s not what Johnson had in mind.
While he didn’t address leveraged trading directly, Selig implied that under his watch, prediction markets will continue to have free rein with sports event contracts.
I will continue to support the responsible development of event contract markets and the important role they play in the broader financial system,” Selig said during last week’s joint SEC/CTFC event.
The CFTC announced this week , in fact, that it has withdrawn a rule proposed in June 2024 to disallow prediction markets from offering event contracts tied to sports, political contests or war.
Also read: Trump administration’s prediction market moves feel familiar | Will prediction market bubble burst?
Sports Betting on Crypto.com
Without a hint of covertness, Crypto.com positions OG as a platform for retail “investors” to “trade” sports.
From the first paragraph of the press release:
Combining the accessibility of a consumer app, engagement features of a social media network, and the rigor of an institutional-grade platform, OG provides sports fans access to a most comprehensive range of CFTC-regulated sports event contracts as well as additional event contracts across financial, political, cultural, and entertainment events.”
Users are greeted by nothing else but “The Big Game” markets when they open the OG app. The home screen is a bit jumbled, with Kenneth Walker III and Cooper Kupp props presented in rather unorganized fashion on top of the moneyline.
Novelty props include Bad Bunny songs to be played at halftime, the coinflip, National Anthem and Gatorade shower. There are also game props like MVP and will there be a safety, plus scoring props, TD props and defense props.
For now, this writer has $10 of his (minimum) $20 deposit invested in New England +4.5.
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