Author: The Editorial Board, Bloomberg Opinion
Translated by: Deep Tide TechFlow
Deep Tide Introduction: Bloomberg's editorial board has rarely called out Kalshi and Polymarket, directly stating that these two companies are gambling operations circumventing regulation—90% of their revenue comes from sports betting, their user age threshold is three years lower than that of legal casinos, and there may even be insider trading.
As the monthly trading volume of prediction markets surpasses ten billion dollars and Nasdaq begins to enter the arena, the regulatory pressure represented by this article deserves serious attention.
Full text as follows:
There's an old saying about ducks: if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. U.S. regulators are currently ignoring this logic—they are accepting the argument from certain betting companies that "we are not betting companies, we are prediction markets." Congress should intervene before this charade causes more harm.
Over the past year, platforms like Kalshi and Polymarket have flourished, allowing users to predict the outcomes of sports events, political developments, and various other events. These platforms have a preferred euphemism: they are not betting brokers but "prediction markets"; placing money on the outcome of a football match is not called a bet but an "event contract."
This is not just a semantic debate; it involves real regulatory arbitrage.
Traditional sports betting companies like FanDuel and DraftKings obtain licenses state by state and must comply with age restrictions, geographic limitations, and responsible gambling safeguards. In contrast, prediction market platforms claim their products fall under the federal Commodity Exchange Act (CEA) and should not be subject to these state-level rules. They register with the Commodity Futures Trading Commission (CFTC) and seek regulatory endorsement for their betting operations.
The CFTC has shown a willingness to cooperate—last month, it withdrew a proposal that would have banned sports and political contracts. Several states have filed lawsuits to defend their gambling regulatory authority, and the dispute over who has the right to regulate these companies will likely end up in the Supreme Court. But the core facts are clear.
First, these companies are engaged in sports betting and other gambling activities, with almost nothing in common with traditional commodity market trading.
Second, they hold a significant advantage over competitors who comply with state laws. Approximately 90% of Kalshi's fee income comes from sports events. Meanwhile, the stock prices of traditional sports betting companies have been hit hard.
Third, Kalshi and Polymarket allow users as young as 18 to participate, while the legal age in most states is 21. This exposes younger users to risks such as debt, financial instability, addiction, and crime. Some applications are also applying to offer margin trading (i.e., trading on credit), which could further exacerbate the problem.
Fourth, Kalshi has partnered with Robinhood, meaning the line between brokerages and bookmakers is blurring, which could have catastrophic consequences for a large number of investment accounts.
Beyond these issues, there is also the risk of corruption. Just before Iran's Supreme Leader Khamenei was killed in an Israeli airstrike on February 28, an account on Polymarket heavily bought contracts predicting "he will lose power soon"—suggesting that some traders may have had insider information. The total trading volume surrounding this airstrike exceeded $500 million.
When Congress enacted the Commodity Exchange Act in 1936, it clearly did not anticipate that it would give rise to large-scale national betting companies or create prediction markets for public affairs that are so easily manipulated. Congress should take the initiative to intervene rather than wait for years of litigation to drag on, leaving countless users to lose their money in the meantime.
As a starting point, Congress should amend the CEA to clearly define "event contracts"—distinguishing contracts with reasonable market logic from purely gambling in nature (such as sports bets), while restricting gambling on political events; ensure prediction markets follow clear rules rather than the CFTC's arbitrary discretion; and, referencing the SAFE Betting Act, establish basic consumer protection standards for all betting companies while allowing states to impose stricter regulations.
Ideally, lawmakers should perhaps take this opportunity to reexamine America's experiment with "ubiquitous, anytime gambling" in the smartphone era—an experiment that has led to rising debt, defaults, and other social problems. For now, merely bringing order and common-sense restrictions to these chaotic markets would be a significant step forward.
