WASHINGTON, Oct 26 (Reuters) - A US regulator and the National Basketball Association entered into a cooperative agreement over prediction markets, the Commodity Futures Trading Commission said on Monday, amid concerns about insider trading and market oversight.
The two entities agreed to share related information that could have a direct impact on the "integrity" of professional basketball, according to a copy of the memorandum of understanding signed by CFTC Chairman Michael Selig and NBA Commissioner Adam Silver.
The NBA said it had designated Kalshi and Polymarket as the league's preferred prediction market exchanges, agreements that the league said "put in place significant integrity protections," limiting permissible markets.
"Protecting the integrity of the game is our top priority," Scott Kaufman-Ross, NBA head of media distribution & partnerships, said in a statement.
"As this category develops, we believe it is important to work constructively with regulators and operators to help ensure that appropriate safeguards are in place. These partnerships represent an important step in establishing a framework that creates new opportunities to engage our fans."
The agreement follows recent sports betting scandals that have resulted in lifetime bans from the NBA and other charges, including the arrest of more than 30 people last year in connection with a federal probe into illegal gambling.
Prediction markets like Kalshi and Polymarket have long said they are not betting platforms but trading platforms.
The NBA is the third of the big North American sports leagues to sign a prediction market deal, after the NHL and MLB.
The NFL backed a request for the US Supreme Court to review a dispute over whether states should oversee sports-related prediction market contracts.
The NBA does not allow players to have endorsement deals with betting operators but multiple players, including four-time MVP LeBron James, have deals with prediction platforms.
Kalshi struck a partnership deal with the US Open tennis major earlier this year, while the men's ATP tour signed a similar deal with Polymarket.
The CFTC has asserted oversight of prediction markets, arguing they are facilitating trading in a type of financial instrument, and reiterated its stance in the agreement released on Monday.
Multiple states have sued to block the CFTC's attempt to assert oversight, arguing prediction markets are facilitating gambling and as such their sports bets should be subject to stringent state laws.
(Reporting by Susan Heavey and Amy Tennery; additional reporting by Michelle Price; Editing by Doina Chiacu and Ken Ferris)