Regulatory war over platforms like Polymarket and Kalshi intensifies in the US.
The political and regulatory dispute surrounding prediction markets in the United States entered a new phase of open war. The central question: are the Polymarket website and similar sites legitimate financial instruments, subject to federal supervision, or are they, in practice, equivalent to sports betting and gambling, and must therefore comply with state gambling laws?
The war is already political, but this time it does not oppose Republicans and Democrats, notes the . There are conservative figures aligned with states that defend stricter rules, while elements linked to Donald Trump’s universe and Democrats linked to the financial sector appear on the side of a more permissive approach.
Prediction markets allow users to trade “event contracts”, i.e. positions tied to the outcome of future events. About what topics? All and more: even about the outcome of last month’s Portuguese presidential elections, as you reported. And there was a Frenchman betting on Trump.
Users buy and sell contracts based on the probability of a certain outcome happening, in a model where participants trade with each other.
A Kalshicurrently the main platform in the North American market, operates in all 50 states. Already the Polymarketits direct rival, was banned in the US in 2022 for operating as an unregistered derivatives market, although it returned last year, in a limited way.
According to Kalshi herself, in the last one, more than US$800 million in transactions were recorded in a single day in contracts linked to the game alone. In total, contracts related to the event exceeded R$1.3 billion negotiated. What started as a niche financial experiment became, in just a few years, a mass phenomenon and a multi-million dollar business.
Financial market or casino?
Defenders of the sector say that these markets democratize access to financial instruments previously reserved for more sophisticated investors and that they function as useful forecasting tools. They say there is a structural difference compared to a casino: platforms do not bet against customers.
According to Kalshi, this model allows for fairer prices, the possibility of closing positions before the final result and the absence of common practices that are less popular in bookmakers, such as limiting or blocking winning customers.
But critics say that, in practice, the product is equivalent to a bet and that the chosen legal form masks an activity that should be subject to the same rules as legalized gambling: state licensing, supervision, taxation and consumer protection mechanisms. We are facing a real gray zone.
Currently, federal oversight falls to the Commodity Futures Trading Commission (CFTC)the agency responsible for financial derivatives in the USA, which already has a history with prediction markets.
Those who are against these markets consider that the CFTC cannot have exclusive authority over contracts that, in its view, function as sports betting — the platforms should, they say, comply with state laws.
Kalshi is currently facing 19 lawsuits in different states and narrowly escaped a temporary suspension in Massachusetts. At the same time, the issue began to gain weight in Washington: Recently, 23 Democratic senators expressed support for the idea of forcing prediction markets to comply with state gambling legislation.
The CFTC has toughened its stance in recent times and insists it has exclusive jurisdiction over these products. The agency filed an opinion in support of Crypto.com, which is in dispute with Nevada regulators for also offering sports prediction contracts. And whoever goes against its authority, the CFTC will take it to court.
