Prediction markets in sport refer to the use of market-based mechanisms — closely resembling financial markets — to forecast the outcomes of matches and sporting events, and potentially to hedge their financial consequences. In practice, the most familiar expression of such mechanisms is sports betting: bookmakers’ odds reflect implied probabilities shaped by the so-called “wisdom of the crowd,” as revealed through the aggregated stakes of thousands of bettors. This raises an important question: could these market mechanisms evolve beyond mere gambling for fans and become genuine tools of risk management for clubs?
In theory, one could imagine a scenario in which a football club attempts to hedge the financial consequences of sporting failure in much the same way that farmers have historically used futures contracts to protect themselves against price fluctuations in commodities such as wheat or cotton. In this case, the club would take the opposite position in a prediction market. For instance, it could enter a financial position that pays out if the team fails to qualify from a given competition or loses a final. Should the sporting defeat materialise—along with the associated financial losses—the payout from such a position could partially offset or “insure” those losses.
In practice, however, such arrangements are both legally and ethically unacceptable. Individuals connected to a club—including owners, executives, players, and coaches—are prohibited from betting on matches involving their own team. Even more clearly, clubs themselves are not permitted to place bets against sporting outcomes in which they are directly involved, as this would create an obvious conflict of interest and a heightened risk of corruption. Sports governing bodies, including FIFA, UEFA, and national associations, strictly enforce these prohibitions and impose severe sanctions for any violations.
Experts, however, wonder whether in the future it will be possible to create regulated prediction platforms designed strictly for hedging purposes in sports - with only authorized players, operating transparently and with the approval of league bodies. Such a market could resemble a futures exchange for sports events - e.g., a financial contract dependent on whether Club X advances to the European competition. Transactions would take place in an open, regulated market, with multiple investors, rather than in the form of a private contract with a single company. This would increase liquidity and the availability of hedging for interested clubs. But... there is a big "question" - about fairness, sometimes translated as the integrity (integrity) of the sport. If clubs could financially mitigate the consequences of their own failure, wouldn't moral hazard arise? Even with the best of intentions, and after all, the non-zero price of such a transaction, wouldn't the opportunity to make money on a failure create additional risks - such as the subtle pressure to "let go" of a match when the budget will be essentially secured anyway? For this reason, soccer institutions see more risks than benefits for now.
Signs from financial market regulators so far are also skeptical. In the U.S., for example, the Commodity Futures Trading Commission (CFTC), which oversees futures exchanges, has blocked attempts to introduce futures contracts based on sports scores, deeming them to be camouflaged gambling against the public interest (lacking sufficient hedging justification). In 2021, the CFTC rejected an application by the ErisX exchange to allow futures contracts on NFL games, arguing, among other things, that they would be de facto the same as betting contracts offered to the public and would mainly serve bookmakers to hedge their own bets, while excluding investors. The CFTC has indicated that it cannot allow legitimate bookmakers to trade contracts hedging their risks on the exchange if, at the same time, ordinary sports fans would not be free to buy such contracts - this would be contrary to the principle of equal access and the public interest. In the regulator's view, the contracts proposed by ErisX lacked sufficient hedging value and were essentially the equivalent of sports betting in an attempt to tap into the regulated financial market. Although one CFTC commissioner suggested that if, in the future, an applicant could be found who could demonstrate a genuine economic purpose (e.g., protecting the revenue of clubs or bookmakers) and provide universal access to such contracts, it might not be against the public interest, for the time being no such approvals have been granted.
As a result, as of today there are no legal "score exchanges" available to clubs - predictive markets remain the domain of fans and gambling entertainment, rather than a tool of financial security for sports entities. In recent years, however, platforms have emerged that are trying to approach the idea in other fields. For example, the US platform Kalshi is the first fully regulated event contracts exchange - it allows trading binary contracts on various events (political, economic, weather, cultural). Although it has shunned sports until recently, in 2023 Kalshi attempted to introduce contracts based on the results of MLB (baseball) games, claiming to be operating legally within the federally regulated market. This was met with a harsh response from the sports community, with the NBA and MLB formally applying to the CFTC, warning that such platforms could threaten the integrity of the games and demanding strict oversight or a ban on such practices. Kalshi's operations are also being watched by state authorities - several states have deemed such contracts as circumventing sports betting laws and issued cease-and-desist orders, leading to litigation (Kalshi has managed to obtain preliminary injunctions blocking regulators' actions in New Jersey and Nevada, among others). The Kalshi operator itself argues that its platform is different from betting shops - it operates like an exchange, where users trade "YES/NO" contracts among themselves, rather than betting against a "bank," and thus should be subject to different regulations.
In addition to Kalshi, decentralized platforms based on crypto-technology, such as Polymarket and Augur, are also developing. Their goal is to create global predictive markets available online - allowing users to create and place bets on any question (from politics and cryptocurrency rates to sports events). They are tempted by the idea that the "wisdom of the crowd" will translate into accurate valuations of event probabilities, and at the same time everyone will be able to "hedge" financially against a certain outcome (e.g., a farmer against a crop failure, a company against a pandemic, or maybe one day a football club against relegation?). However, these platforms face serious restrictions. Polymarket was fined by the CFTC for offering illegal contracts without registration (it had to pay $1.4 million and shut down some markets). Augur, on the other hand, struggles with low liquidity and lack of oversight - most users treat these exchanges as a curiosity, not a serious financial tool. Neither of these platforms is designed with sports clubs in mind - rather, they are prototypes of global peer-to-peer betting, currently remaining in a gray area between the financial market and gambling.
Perhaps in the future we'll see more formalized solutions - for example, if the sports leagues themselves created something like a central insurance fund or an internal hedging platform available to clubs under the supervision of regulators. One could imagine a model in which clubs pay premiums into a common pool, and the fund (supplemented by capital from the financial market) pays out benefits to those who go down with sports, with the much simpler, and similar in effect, practice of so-called "parachute payments" (parachute payments) for league relegates already known. But going back to the idea of a central fund or hedging platform, the risk of failure would be socialized or transferred to external investors, so to speak, while no club would have the unilateral benefit of its own loss (payouts would be from a central pool under clearly defined rules). For the time being, however, these are purely theoretical concepts and require changes in football market regulations.
