A new set of NFL futures contracts could help sportsbooks and stadium owners offload unwanted risk. If approved, Eris Exchange, LLC (ErisX), will offer moneyline, point spread, and over/under futures contracts for every NFL game. While sports bettors won’t be able to trade these contracts, they could benefit from better odds and increased action.
Ideally, sportsbooks want a balanced book and strive to have equal action on each side of a bet. They’d prefer to collect risk-free fees on each transaction — or a vig. But keeping a balanced book is challenging, especially in light of existing federal restrictions.
NFL Futures Tackle Wire Act Issue
When the US Supreme Court lifted the ban on sports betting, states rushed to get in on the action, but the court’s ruling didn’t remove all federal restrictions on sports betting. One federal leftover from the 1961 Wire Act makes it illegal to transfer money wagered on sports across state lines. That makes it all the more difficult to balance a book.
For instance, in 2019, New Jersey sportsbooks lost $4.5 million on Super Bowl LIII. Roughly 75% of FanDuel’s Garden State bets were on the Patriots. Meanwhile, Vegas sportsbooks cleared $10 million on the game. Without the Wire Act, New Jersey could have easily offloaded its imbalance with the predictably heavy Los Angeles action in Nevada. NFL futures contracts, however, could allow sportsbooks to balance their risk without moving bets across state lines.
According to a Commodity Futures Trading Commission (CFTC) filing, only “eligible contract participants,” such as sportsbooks, stadium owners, and NFL vendors would be allowed to trade the proposed NLF futures contracts. But, sports bettors could also benefit.
Currently, sportsbooks must either limit action or change the odds if they need to reduce their game risk. Neither of those options is good for in-state bettors. And, it also hurts the sportsbooks. Offering less desirable odds or limiting the action results in lost business to other sportsbooks — either to neighboring states or to illegal options.
Are Sports Futures Contracts Gaming?
Futures contracts are a common way for a business to offset risk with a counterparty. For instance, farmers use crop contracts to protect against price drops in the future, while food producers take the other side of the contract to protect against potential price increases. Likewise, oil companies take one side of an oil futures contract, while fuel-buying airlines might take the other.
Sportbooks from different states could become NFL futures contract counterparties. ErisX plans to list futures contracts for every NFL game. If approved, it will offer a moneyline and over/under contract for each game. It will also offer a minimum of 11 different point spread contracts in half-point increments. If the national point spread average changes, it would provide additional contracts so that there would be at least five point-spread contacts on either side of the new average.
The ErisX NFL futures contracts have a significant hurdle to clear before they can be approved. The exchange must demonstrate that the contracts are not related to gaming, which would violate CFTC regulations. That’s easy to prove for a contract based on the price of corn or oil, but is trickier for a contact based on the outcome of a sporting event for the benefit of a gaming operator. The proposal is currently under a 90-day review, specifically designed to make that determination.
