Cryptocurrency exchange Crypto.com has debuted a first-of-its-kind trading platform that allows users to trade their predictions about the results of sporting events.
Crypto.com CEO Kris Marszalek hailed the company’s “sports event trading” as a “unique” offering in the US market.
“This unique financial product allows users to trade their prediction on the outcome of a sports event. It’s a fundamentally new concept for sports, and we’re thrilled to be the first regulated platform in the U.S. to offer it to our users.” — Crypto.com CEO Kris Marszalek
How sports event trading works
A traditional sports bet allows an individual to place a wager on the outcome of a game, half, quarter, play, player’s performance, etc. Users are wagering against the sportsbook.
In sports event trading, individuals become the sportsbook. Instead of, say, DraftKings or FanDuel creating bets for the outcome of the Super Bowl, sports event trading bases “contracts” on yes/no prediction rates of game outcomes.
For example, Crtypo.com could offer a market for the outcome of the Super Bowl. Users can log into their accounts through a web browser or the Crypto.com app. They could then tap on or click the Super Bowl market. Crytpo.com would show the prediction rates for each team.
In the example below, 31% of contracts say the Kansas City Chiefs will win. If users want to create a contract for a Chiefs win, they simply click on “Yes.” The contract price is the dollar equivalent of the “Yes” rate, which, in this case, is $31 for 31%.
Once a user places the order, that person would wait for another user who thinks the Chiefs will lose to buy the contract. If the Chiefs win, the user who created the contract would win, and vice versa.
Crypto.com’s sports event trading is a type of derivative, in which two parties agree to a contract that’s based on an underlying market factor (in this case, the rate at which traders believe a team will win or lose a game) without actually owning the underlying asset.
How sports event trading came to life
The typical sports bet made through a sportsbook has to comply with local, state, and federal regulations. Generally speaking, state gambling commissions or lotteries oversee the regulation of sportsbooks.
Sports event trading falls under the Commodity Futures Trading Commission, a federal department that, among other things, has the final say on what types of contracts are legal and illegal.
Companies have been interested in using trading platforms for sporting events since at least as far back as 2020, according to CFTC records.
Crypto.com is allowed to offer derivative-based sports event contracts under approval from the CFTC.
