U.K.-based betting exchange Smarkets has officially filed for federal approval to launch a regulated prediction market in the United States, a move poised to disrupt the American sports betting landscape. The application, submitted to the Commodity Futures Trading Commission (CFTC) this week, seeks Designated Contract Market (DCM) status. If approved, this would allow Smarkets to offer event-based wagering—including sports contracts—in all 50 states, effectively bypassing strict state-level gambling prohibitions in massive markets like California and Texas.

Smarkets Targets US Launch via Federal Commodities Law

The filing represents a strategic pivot for Smarkets, led by CEO Jason Trost, who has long eyed the U.S. market. Unlike traditional sportsbooks that require state-by-state licensing, a CFTC-regulated exchange operates under federal commodities law. This regulatory pathway, often described by critics as a "loophole," classifies wagers as "event contracts" or derivatives rather than gambling. This distinction allows operators to accept trades from users across the country, including in jurisdictions where online sports betting remains illegal.

The Smarkets US launch would introduce a true peer-to-peer exchange model to American bettors. Unlike the fixed-odds model dominated by FanDuel and DraftKings, the Smarkets exchange allows users to set their own prices and trade against each other, typically resulting in better odds and lower transaction fees. The company is reportedly updating its interface to align with U.S. preferences, replacing traditional "back" and "lay" terminology with "buy" and "sell" options similar to financial trading platforms.

The 'Loophole' Reshaping American Sports Betting

Smarkets is following a trail blazed by competitors like Kalshi and PredictIt, who have successfully argued that their products are financial instruments. This prediction markets sports betting model has exploded in popularity, particularly since a federal court ruling in late 2024 limited the CFTC's ability to arbitrarily block election and sports contracts. As a result, 50-state sports betting access has effectively become a reality, albeit through a different regulatory door.

California and Texas in the Crosshairs

The implications for states with strict anti-gambling laws are profound. In California, where voters overwhelmingly rejected sports betting propositions in 2022, residents can already legally trade on sports outcomes via existing prediction markets. A Smarkets launch would significantly deepen the liquidity available to these bettors. With California online sports betting 2026 legalization efforts still facing significant political hurdles, these federal exchanges offer the only legal alternative for millions of sports fans in the Golden State.

Regulatory Showdown: CFTC vs. Congress

Smarkets' application arrives during a moment of intense regulatory friction. While current CFTC Chairman Michael Selig has signaled a more open stance toward event contract trading, asserting the agency's exclusive jurisdiction, lawmakers are pushing back. On March 6, 2026, U.S. Representatives Blake Moore and Salud Carbajal introduced the bipartisan Event Contract Enforcement Act. This proposed legislation aims to close the very "loophole" Smarkets intends to use by explicitly banning contracts based on "gaming," including sports and athletic competitions.

If passed, the bill would force the CFTC to reject applications like Smarkets' that rely on sports derivatives. However, until such legislation is enacted, the CFTC remains the sole regulator, and the agency's current leadership appears willing to let the market evolve. This creates a high-stakes race against time for Smarkets to secure its DCM license before the legislative window potentially closes.

What This Means for US Bettors

For the average American bettor, the entry of a sophisticated exchange like Smarkets offers a significant upgrade in options. Exchange betting allows for:

  • Better Pricing: Without a sportsbook building in a heavy vigorous (vig), odds are generally more favorable.
  • No Limits: successful traders are rarely limited or banned, a common complaint with traditional soft books.
  • Trading Flexibility: Users can buy into a position and sell it seconds later, locking in profits regardless of the final game outcome.

As the CFTC betting regulation debate heats up, the arrival of Smarkets could force traditional operators to innovate or lobby harder for federal restrictions. For now, the prospect of a federally regulated, nationwide betting exchange is closer than ever, threatening to upend the state-by-state monopoly currently held by major sportsbooks.