A lively panel at the recent NEXT.io summit in Valletta last week exposed a legal and ideological tug-of-war that’s been quietly building in the U.S. for years. Prediction markets in the US have become a battleground for this debate, blurring the lines between regulation, speculation, and risk. Strip away the noise, and the entire issue hinges on one deceptively straightforward question: Are prediction markets a form of finance, or just another bet in disguise? The implications are anything but academic.
This isn’t the first time the U.S. has struggled to define speculation. From bucket shops in the 1900s to binary options in the 2010s, America’s financial and gambling laws have long danced around grey-market innovation until forced to pick a side. Prediction markets are the latest act.
Platforms like Kalshi and Polymarket have surged in popularity, offering markets on everything from presidential elections to weather patterns. It’s dressed up as trading, but call it what you like. You’re buying contracts that pay if the future bends your way. And if it doesn’t? Tough. It feels like betting. It behaves like trading. But what is it?
A definition in dispute
The tension became immediately clear onstage. Some panellists argued that the platforms offer financial instruments. Others insisted it’s plain old wagering. “If you’re betting whether the New York Yankees beat the Padres,” one speaker challenged, “are you hedging, or are you gambling?”
This debate isn’t new. The U.S. legal definition of a wager hinges on the risk of something of value on a future contingent event. That definition, critics argue, comfortably includes event-based markets. However, proponents of platforms like Kalshi maintain that these are legitimate financial tools, much like weather derivatives or insurance-backed futures.
Who regulates this?
In the U.S., most gambling regulations fall to the states. However, these platforms are overseen by the Commodities Futures Trading Commission (CFTC), a body with no remit over sports integrity, match fixing, or responsible gambling. Kalshi, for instance, operates with self-certified event contracts, skipping the state-by-state licensing, auditing, or pre-approved odds sheets required of sportsbooks.
The challenge is structural. The , game integrity, or compulsive behaviour. Its remit is market manipulation, not match-fixing. Until the U.S. creates a body that spans both gambling and trading spheres, regulation will remain reactionary.
This regulatory blind spot is increasingly under scrutiny from the wider sports world. Major League Baseball has reportedly struggled to access data from some of these platforms. Unlike sportsbooks, exchanges can legally decline to share trading information, which is a gap that leaves sports regulators flying blind.
Why it matters now
Prediction markets gained widespread attention during recent U.S. elections, where platforms allowed users to buy contracts on who would win. The legality of such trading across all 50 states, especially in the absence of strict advertising guidelines, raised eyebrows.
“This is a multibillion-dollar market with little to no oversight,” one panellist said. “And yet, it’s more accurate than the polls.”
In the run-up to the 2024 U.S. presidential election, platforms like Kalshi were again offering high-traffic markets on state-by-state outcomes despite legal challenges. In a fragmented political climate, these platforms are no longer just novelties. They influence how people think, feel, and plan.
Accuracy aside, the concern isn’t whether the public can forecast political futures better than pundits; it’s how these platforms are being marketed, regulated, and taxed. Or more accurately, not taxed. Unlike sportsbooks, prediction markets don’t operate under the same state tax regimes. Their incentives differ. They aren’t looking to get more losers on the platform; they want more volume, more participation.
“It’s not about getting more losers,” said one speaker. “It’s about boosting participation and growing the volume.”
Betting exchanges like Betfair have been around for decades in Europe, but never gained traction in the U.S. because of liquidity challenges and legal restrictions under the Wire Act. Prediction markets, in contrast, are now slipping in through regulatory cracks.
Sportsbooks vs traders
The fundamental difference is structural. Traditional sportsbooks operate on a house model: you bet against the bookmaker, and they set the odds. With prediction markets, you’re trading against other users. It’s an exchange, not a book. The event types are unvetted and platform-defined, so no central regulator signs them off in advance.
That design draws a different crowd. TikTok and Instagram ads from platforms like Polymarket target Gen Z users who are fluent in crypto and trading language. These are not your average NFL bettors. These are digital natives raised on Robinhood, not Ladbrokes.
Behaviourally, these platforms borrow from fintech. Users receive push alerts, real-time volatility cues, and even trading volume charts tools that replicate the dopamine rush of crypto investing more than the suspense of a match-day accumulator.
These platforms don’t look or feel like sportsbooks. One panellist described their layout as ‘part blackboard, part spreadsheet’, and they hook users via Instagram reels and TikTok demos instead of banner ads or match-day boosts.
“I think they’re focused on a different generation,” said one panellist. “People coming from equities or crypto, looking for a more active, trader-style experience.”
Integrity, risk and the Oscars
Some say the concerns around match fixing or integrity are overblown. Sports like baseball or football are already well-regulated. Events like the Oscars or elections have the glow of a harmless app, but don’t be fooled. There’s no safety net, no timeout button, and no one making sure it doesn’t all go sideways. The scope for insider information, opaque outcomes, and external influence is far greater, yet the regulatory protection is far weaker. That imbalance invites abuse.
The CFTC’s crossroads
The CFTC finds itself ill-equipped to tackle these emerging markets alone. Its core mandate is price manipulation in commodities and financial instruments, not game integrity or gambling-related harm. As these platforms develop, the agency will probably need help from experts outside its remit.
“The CFTC is regulating itself right now,” one speaker said bluntly. “Until it starts proper rulemaking, we’re all just guessing.”
The CFTC’s position on political contracts has shifted more than once, as seen in its recent decision to withdraw its appeal against Kalshi’s event-based markets. Some panellists hinted that the future of prediction markets may depend as much on politics as on policy. Trump-era CFTC appointments, they suggested, appear more sympathetic to crypto-fuelled innovation and less inclined to clamp down.
A future market or a market for the future?
Looking ahead, prediction markets might become less of a fringe feature and more of a gateway for younger users into broader betting ecosystems, or perhaps they’ll evolve into a unique vertical entirely. What they won’t be is easy to categorise.
If the U.S. is serious about responsible innovation, it must stop pretending these platforms are niche. They’re not. They’re a growing force that sits uncomfortably between finance, gambling, and gamified speculation.
Until regulators pick a side, prediction markets will keep dancing between definitions – not quite bets, not quite finance, but pulling billions into a space no one dares to name out loud. In the end, prediction markets aren’t just testing regulation. They are testing our definition of truth, trust, and what it means to “know” something before it happens.
And until that question is answered, every trade sits somewhere between a bet and a bluff in the land of the free.
