However, the regulatory framework, where the markets are regulated via the US derivatives regulator the Commodity Futures Trading Commission (CFTC), has raised some eyebrows, with many critics arguing they amount to little more than a backdoor to federal sports betting legalisation.
In recent months the markets have expanded to include “sports event-contracts”, allowing s to trade on the outcome of sports games and adding further fuel to the fire.
Not helping matters are vaguely questionable moves in the regulatory space, such as Kalshi hiring Donald Trump Jr. as an advisor or the incoming CFTC chair being a board member at the business.
Speaking during the discussion, ‘Forecasting the Future: Tech, Regulation, and the High-Stakes World of Prediction Markets‘, figures from both sides of the divide clashed about the legality of the platforms and what they mean for the future of the industry.
Prominent gaming lawyer Daniel Wallach argued prediction markets currently should be barred under the Federal Wire Act, which prohibits the interstate transmission of bets or wagers.
“These event contracts are bets or wagers, because, as betting or wagering is defined under either UIGEA or under most state gambling laws, it’s the risking or staking something of value on a future contingent event or a sporting event with the prospect of a payoff.”Representing the pro-prediction markets side of the argument, partner at Princeton Public Affairs Group Bill Pascrell III painted the vertical as anything but betting.
Bill Pascrell III: prediction markets future ‘far brighter’ than sweeps
“There’s a guy in America who’s based in Vegas… Billy Walters,” he said. “Billy Walters used to be a stock trader, and now he operates a book in his home just outside of Vegas. And he educated me years ago because he’s a big golfer, and I like golf, on how there are similarities between the stock market and wagering, but they’re clearly different.
“And I believe that — I do not think the predictive markets are wagering full stop… And I do believe the future for predictive markets is far brighter, and I’m encouraged about it, than sweeps and social casino.”
Putting aside the legal question, Will Martin, CEO of sports and esports prediction market LiveDuel, highlighted the opportunity of prediction markets to shake up the customer experience offered by traditional sportsbooks.
“[T]hey can start with a blank slate,” he argued. “If you look at any traditional betting company, they all look and kind of feel the same everywhere, everything kind of follows the same design pattern which comes from old blackboards back in the UK in the 1920s, if you’re a fan of Peaky Blinders, that starts off with a grid, and it’s a digital grid, so it looks like it’s very cheap.
“Whereas when you start a new thing like prediction markets, you can start fresh and tailor more towards that target demographic.”
