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Philadelphia-based Sporttrade‘s plans to enter the prediction markets industry reached a milestone last week, with Commodity Futures Trading Commission approval to operate a clearinghouse, that handles the financial obligations and payments arising from prediction market trades.
The company has a separate open application to allow it to operate an exchange.
Sporttrade’s website currently describes the business as “the prediction market for sports” and says it is re-entering the market soonm though it does not provide a launch date. Sporttrade announced in February that it had submitted clearinghouse and exchange applications.
The company was originally built around state-regulated sports wagering but withdrew from the market earlier this year after expanding to five states.
“Federal registration will thus allow us to finally unlock the full potential of our natively-built exchange, clearing, and broker technology in our pursuit to always put the customer first,” founder and CEO Alex Kane said.
According to CFTC filing records, the agency registered Sporttrade DCO LLC on Oct. 16. The registration allows the company to operate as a derivatives clearing organization, clearing fully collateralized futures, options on futures and swaps, trades backed upfront by enough money to cover the maximum possible losses as a Derivatives Clearing Organization (DCO).
Exchange still needs approval
The CFTC’s approval covers the clearinghouse, not the exchange itself, a Designated Contract Market (DCM). Clearinghouses handle the settlement of trades. Exchanges provide the marketplace where contracts are traded. The agency’s designated contract markets register lists Sporttrade DCM LLC’s application as pending, with a Jan. 27 application date.
Before announcing its withdrawal from the sports betting market earlier this year, Sporttrade had expanded its betting platform to five states. In New Jersey, it set itself apart from other sportsbooks positioning its business as a marketplace, not a sportsbook, allowing customers to trade positions tied to sporting outcomes.
When it submitted its CFTC applications in February, the company claimed that it was “the first company to apply for DCM registration while also operating a state-regulated platform,” previewing its plans to transition from a state-regulated sports betting operator to a federally regulated prediction markets operator.
