It’s been seven years since the US Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), thereby giving 49 states the right to follow Nevada in legalizing sports gambling. But for as pervasive as the industry has become across all media, sportsbooks are still banned in 21 states, including California and Texas, where a fifth of all Americans reside.
Enter event-based prediction markets — a new front in gambling’s nationwide turf war that’s giving all Americans, 18 and up, the chance to wager on sports over the objections of state regulators.
The emerging industry’s trading platforms work like online sportsbooks by offering futures contracts at prices and returns that fluctuate like betting odds (i.e. underdogs pay off better than favorites). Customers are given binary choices (‘yes or no’ or ‘one or the other’) on any number of positions, from gas prices to the next Pope and, of course, sports: Will the Celtics win this year’s NBA title? etc.
Platforms like Kalshi and Polymarket made news during the 2024 US Presidential race by using customers’ wagers to accurately forecast Donald Trump‘s electoral victory over Kamala Harris. Since then, the industry has faced cease-and-desist orders in six states as platforms have taken hundreds of millions of dollars in bets on everything from March Madness to the Masters.
Crucially, these websites consider themselves to be ‘exchanges’ rather than ‘sportsbooks.’ As a result, they face fewer taxes and are more widely available because they’re not being prohibited, or even regulated, by individual states. Rather, prediction markets are under the federal jurisdiction of the Commodity Futures Trading Commission (CFTC) — something Nevada state senator Dina Titus sees as a ‘backdoor way’ to legalizing sports gambling without necessary safeguards.
But if you’re expecting critics of online sportsbooks to protest these providers, think again. Instead, the prediction markets have found an ally in reformers like the powerful Campaign for Fairer Gambling, not to mention Donald Trump Jr. and his father’s pick to lead the CFTC, Brian Quintenz, both of whom have ties to Kalshi.
Crypto.com gives prediction markets investors a chance to ‘profit when you’re right’
Kalshi isn’t technically a sportsbook, but it did allow customers to wager on Super Bowl LIX
Brian Quintenz, Trump’s nominee to lead the CFTC, is currently on Kalshi’s board
‘I’m not saying there should be predictor markets,’ Derek Webb, a former professional poker player and founder of the Campaign for Fairer Gambling (CFG), told DailyMail.com. ‘I’m saying it’s already there. It’s existing. Am I going to oppose it? I’m not going to spend my time opposing it… I’m going to say if it happens and if it’s finally legal, let me see if there’s any way I can influence it to be better than it would be if I wasn’t there to influence it.’
The inventor of Three Card Poker, who has made millions licensing that product to brick-and-mortar casinos, Webb’s impact as a gambling reformer has been felt on both sides of the Atlantic. Prior to the CFG’s recent efforts in the US, the campaign successfully pushed to reduce the top bets on UK slot machines from ₤100 to ₤2.
Along with another member of the CFG, recovering gambling addict-turned-campaigner Matt Zarb-Cousin, Webb helped launch the self-exclusion software, Gamban, which players can use to protect themselves from the dangers of online betting.
Gamban has since partnered with online sportsbooks like FanDuel, which now offers its own responsible gaming dashboard, referred to as ‘MySpend.’ Another top online sportsbook, DraftKings, has its own version, ‘Stat Sheet,’ but both online tools work to reduce harm by tracking players’ activity, trends, deposits and withdrawals, as well as net profits and losses.
Believing more needed to be done, the CFG ‘proudly’ endorsed the GRIT Act, which seeks to treat problem gambling as a national health concern with the use of tax proceeds from the industry. That bill was first sponsored in the senate by Connecticut Democrat Richard Blumenthal and aims to funnel between $50 million and $100 million to states for fight gambling addiction.
Months later, Webb slighted sportsbooks by telling the Washington Post: ‘You put the most addictive behavior [gambling] on the most addictive device [mobile phones]. What could go wrong?’
That quote has since been included in the city of Baltimore’s lawsuit against FanDuel’s parent company, Flutter Entertainment, and DraftKings, both of which are being accused of targeting problem gamblers.
DraftKings has declined to comment publicly on the lawsuit, while FanDuel has released a statement without specifically addressing the city’s claims: ‘We are confident the company operates in accordance with all laws, including those established and enforced by the state of Maryland’s Lottery and Gaming Control Commission.’
Prediction markets like Kalshi give customers choices on any number of positions, from gas prices to sports and even questions about who will be pardoned by Trump in his first 100 days
The inventor of Three Card Poker, who has made millions licensing that product to brick-and-mortar casinos, Derek Webb’s impact on gaming has been felt on both sides of the Atlantic
Where prediction markets are concerned, Webb sees illegal, unregulated websites as the real problem facing gamblers. And with the CFTC planning a yet-to-be-scheduled roundtable on the subject, Webb & Co. have penned an open letter publicly requesting a seat for what promises to be a consequential discussion.
As Webb told DailyMail.com, he supports the prediction markets’ move under the commission’s oversight in order to squash the black market, uphold regulated gaming practices and protect consumers.
‘It isn’t that we support the totality of the gambling landscape,’ Webb said. ‘[It] includes illegal predictor markets that is not the markets under the CFTC. So it’s important to address the majority of the harm. The majority of the gambling harm in the United States is online, rather than bricks-and-mortar [casinos], and the majority of it relates to the existing illegal market using existing products, existing content, the offshore illegal market that’s targeting Americans.’
But that argument isn’t sitting well with some industry insiders, who are struggling to reconcile Webb’s permissive stance on prediction markets with the CFG’s efforts to combat addiction.
On one hand, he’s keenly aware of the dangers of online gambling, particularly when it can be done over a mobile phone.
Yet, Webb and the CFG are supporting online prediction markets that are effectively legalizing sports gambling across all 50 states. And unlike most forms of sports gambling, which require customers to be at least 21, prediction markets are open to anyone older than 17.
‘I don’t know how they can square their position of being pro reform yet at the same time, essentially open the door to 50-state online sports betting without any meaningful regulation or oversight,’ industry consultant John Pappas told DailyMail.com. ‘I was shocked by their recent letter in support of these markets.’
Prediction markets can also be used to forecast political races, as was the case in November
Webb denies supporting the unregulated expansion of sports prediction markets, telling DailyMaily.com: ‘If I get a seat at the [CFTC roundtable], then I can have that conversation.’
For his part, Webb insists he is not profiting off of his efforts: ‘Nobody pays me anything. I’m doing this philanthropically.’
But some industry insiders remain skeptical about Webb’s efforts.
‘So you’ve got to wonder, is there an ulterior motive in what they’re doing?’ Gene Johnson, the executive vice president of Victor Strategies and gambling industry insider, told DailyMail.com. ‘Because it really doesn’t seem that it’s benefiting the gamblers.’
Victor Rocha, Johnson’s business partner and the conference chair of the powerful Indian Gaming Association, put a finer point on it in February. On X, Rocha took aim at Webb, the CFG and Brianne Doura-Schawohl, an industry consultant and reformer who works with both the campaign and Underdog, a daily fantasy sports website.
‘Derek Webb, Brianne Doura-Schawhol, & the Campaign for Fairer Gambling are supporting the Prediction Markets?’ Rocha asked. ‘This is why I think the responsible gaming industry is a joke. They’re all selling something and it isn’t responsible gambling.’
Doura-Schawhol did not specifically address DailyMail.com’s queries over potential conflicts of interest, but instead offered a more general explanation about the CFG: ‘The Campaign for Fairer Gambling is not anti-gambling, the Campaign seeks to advance policies that protect consumers, including a more robust federal oversight of the sector.’
Kalshi and other providers such as Robinhood remain undeterred after receiving cease-and-desist orders in Nevada, New Jersey, Illinois, Maryland, Ohio, and Montana.
‘Event contracts offered by Robinhood Derivatives are federally regulated by the CFTC and offered through CFTC-registered entities, assuring that retail customers can access these prediction markets in a safe and regulated manner,’ a Robinhood spokesperson told DailyMail.com in a statement. ‘As a result, we do not believe these contracts run afoul of state laws.’
Other providers are fighting back too. Kalshi recently sued Nevada and New Jersey, similarly insisting the platforms are ‘not a sportsbook,’ but ‘an exchange’ that is ‘overseen by the Commodity Futures Trading Commission (CFTC).’
Robinhood sees itself as a legal exchange offering futures contracts and not a sportsbook
Brick-and-mortar sportsbooks and online rivals see prediction markets as a competitor
The distinction is that, unlike sportsbooks, exchanges like Kalshi and Robinhood are not serving as the ‘house’ or a traditional sportsbook. Rather, they’re connecting participants on both sides of the futures contract and profit off fees, all of which puts the markets, tentatively, under the CFTC’s jurisdiction.
President Donald Trump’s nomination of Quintenz, a Kalshi board member and prediction-market supporter, suggests the move could become permanent for the CFTC.
Originally nominated by Barack Obama in 2016, Quintenz was renominated by Trump in 2017 and led the commission until 2021. He has since been involved with Kalshi and Andreessen Horowitz’s crypto fund, leading to waves of ethical questions. Politico recently reported that Quintenz would step down from Kalshi and his crypto fund if appointed to lead the CFTC.
A CFTC spokesperson declined to comment to DailyMail.com on any potential conflict of interest for Quintenz, citing the fact that he hasn’t been confirmed with the commission yet. Similarly, a Kalshi spokesperson also declined to comment on the nominee, while Quintenz did not respond to messages from DailyMail.com.
Despite support from reformers and the Trump administration, prediction markets still carry many of the same risks as sports wagering. So, it should come as no surprise to see social media posts like ‘Lost it all… $3,000 lesson’ or ‘cute, I’m down $10K’ on Reddit’s Kalshi page.
Major League Baseball also sees the risks of sports prediction markets as being similar to those posed by online sportsbooks. In a letter dated to the CFTC dated March 7, MLB’s executive vice president of legal and operations, Bryan Seely, implored the commission to create ‘integrity framework’ around sporting events contracts.
‘As the resemblance between sports event contracts and traditional sports betting markets continues to grow, so too does the need to replicate the integrity and consumer protections that exist at the state level,’ he wrote. ‘Currently, those protections are lacking.’
Donald Trump Jr. (seen with girlfriend Bettina Anderson) is a ‘strategic advisor’ for Kalshi
As for a resolution to this conflict, many, including Pappas and Webb, believe it will play out in the courts.
However, Johnson sees this as a ‘done deal,’ both because of the looming presence of the President’s oldest son as Kalshi’s strategic advisor and because sportsbooks like DraftKings and FanDuel can simply adopt the exchange model to gain access to lucrative markets such as California.
‘It’s a huge flash point,’ Johnson said. ‘If you go back to 2022 in California, you had a tremendous fight between proponents of mobile sports betting and the Indian tribes. Half a billion dollars was spent on both sides. Three different referendums were proposed, and in the end, none of them passed, and the public was left with a lower opinion of sports betting after the fight.
‘This is all a political fight over whether sports betting should be legal in California,’ he added. ‘Well, now we don’t have to have that fight, because it’s happening.’
The risk, Johnson explained, is denying voters autonomy while removing states’ ability to regulate the gambling industry on their own terms.
‘The feds have a long history of messing things up in terms of gaming regulation,’ he said. ‘So most people in the industry, at least those with the experience that I have, would prefer the federal government not to get involved. Basically, one size probably doesn’t fit all.’
