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The outgoing chairman of the U.S. agency tasked with regulating derivatives markets has warned against the continued blurring of lines between financial markets and gambling.

The warning from Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), comes after several months of exchanges rapidly expanding the types of markets they offer, including markets on elections, and in recent weeks, Crypto.com launching “sports event trading”.

“[Exchanges’] primary function as a means for hedging and price discovery remains paramount and continues to rely upon a fluctuating mix of speculators at the forefront of forecasting changes in the value of commodities and pure gamblers playing the odds for the thrill of a payout, their symbiotic relationship always in the crosshairs of legitimacy,” Behnam said at during a keynote address to the Brookings Institution last week.

“It is of no moment that the line between the two is increasingly indistinct,” he continued.

“What matters is the proposition that when derivatives trading occurs on an organized exchange subject to strictly enforced rules and oversight, and within a system of effective self-regulation, there should be no mistaking the experience for gaming, gambling, or anything less than the bustling throws of commerce.”

Behnam announced his resignation from the commission effective February 7 in preparation for the transition to the incoming administration of President-elect Donald Trump, who has yet to name a nominee for Behnam’s seat.

Behnam also told the Financial Times that he has “strong concern” over contracts related to elections, gaming, and other areas such as violent crime, calling on his eventual successor to bring “a renewed focus” to the issue to establish clearer lines between what is permitted and what is not.

Crypto.com began offering event contracts on the winner of the NFL’s Super Bowl on December 23. Last week, the company added contracts on college football playoff games and other NFL playoff games as well, after filing paperwork with the CFTC to offer contracts based on a “title event” for an association.

“Sports events trading offers an entirely new platform for U.S. users to engage nationwide at Crypto.com and in the Crypto.com app,” said Kris Marszalek, co-founder and CEO of Crypto.com, in a statement. “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.”

The company has yet to offer any contracts that would fall outside a potential 90-day review that the CFTC can elect to begin on any contract submitted to the commission under its self-regulatory model.

Bloomberg News reported Monday that the commission was in the process of voting to subject the contracts to such a review, citing sources familiar with the matter.

With the current contracts offered, the review would allow existing contracts to be settled, as the February 9 Super Bowl is currently the latest sporting event offered by Crypto.com under its sports trading section and such a review would not be completed before then.

The ambiguity over such markets has been an ongoing process in recent years, beginning when Kalshi attempted to offer election markets in June 2023.

The CFTC triggered a review shortly thereafter and found the contracts to be unlawful because they involved gaming, which federal law prohibits in financial exchanges.

Still, the definition of gaming in the statute is vague.

In addition to denying Kalshi’s petition, the CFTC attempted to introduce new rules to expand the definition, citing in part legislative intent demonstrated by senators' remarks that the contracts were designed to “prevent gambling through futures markets” and restrict event contracts on major sporting events.

However, a federal court ruled in September that the CFTC exceeded its authority in prohibiting the contracts.

“Kalshi’s contracts do not involve unlawful activity or gaming,” read the order from U.S. District Court Judge Jia Cobb. “They involve elections, which are neither.”

“This case is not about whether the Court likes Kalshi’s product or thinks trading it is a good idea,” Cobb continued. “The Court’s only task is to determine what Congress did, not what it could do or should do. And Congress did not authorize the CFTC to conduct the public interest review it conducted here.”

With respect to the conversation about sports contracts, Cobb cited federal precedent that the court “cannot take much from the remarks of one senator to elucidate the meaning of the statute”, also pointing out that if the court were to consider the comments at face value, it would show that elections were not intended to be seen as gaming.

Kalshi itself has not offered sports prediction markets, although it has expanded its offering to include hundreds of politically-focused markets in addition to other markets based on pop culture, weather and economics.

Much like in the regulated sports-betting field, the regulated exchanges also face some issues of being publicly conflated with unregulated exchanges such as Polymarket, which has generated backlash in recent days for offering markets on the spread of wildfires in Los Angeles.

Unlike Kalshi and Crypto.com, Polymarket is not an exchange regulated by the CFTC, and while the company is headquartered in New York, the company’s terms of use prohibits users in the United States.