Disrupting the Billion-Dollar Gambling Industry, Prediction Markets Are Being Hunted by the Old Order
Prediction markets are facing regulatory crackdowns in the United States, particularly from state-level authorities overseeing the lucrative sports betting industry. The Tennessee Sports Wagering Council (SWC) recently issued cease-and-desist orders to platforms like Kalshi, Polymarket, and Crypto.com, demanding they halt sports-related prediction contracts for state residents. The SWC alleges these platforms are offering illegal gambling services without a state license, despite being registered with the federal Commodity Futures Trading Commission (CFTC) as designated contract markets.
This conflict stems from the rapid growth of both sectors. Since the federal ban on sports betting was overturned in 2018, the legal U.S. sports betting market has exploded, reaching nearly $150 billion in total bets in 2024. Tennessee, which legalized online-only sports betting, collected over $97 million in tax revenue from it in 2024. Prediction markets, which frame their offerings as "event contracts" (financial derivatives under CFTC purview) rather than gambling, have seen even more explosive growth, with trading volume surging 400% to $40 billion in 2025, with sports-related contracts being the largest category.
This creates a "regulatory arbitrage," allowing prediction markets to operate without state licenses, addiction controls, or high gambling taxes, directly competing with and eroding the tax base of the traditional sports betting industry. The friction is not isolated to Tennessee; multiple other states have taken similar action. Kalshi has challenged several states in court, arguing federal regulation preempts state law, but court rulings have been mixed and the issue is expected to eventually be decided by the U.S. Supreme Court. The core of the conflict is the fundamental similarity of the services offered versus their differing regulatory classifications, setting the stage for a prolonged legal battle over this grey area.
Odaily星球日报01/12 02:50
