The gaming industry has long been a battleground for innovation, regulation, and a source of tax revenue for the states. In recent years, the rise of sports betting has transformed the landscape, with nearly 40 states legalizing, regulating, and taxing wagering activities.
However, the emergence of platforms like Kalshi and Crypto.com, which have started offering bets on sports under the guise of predictive markets, is sparking a contentious question: Are these platforms simply sports betting platforms in disguise, and if so, should they be subject to the same state-level regulations that govern traditional sports betting? The answer, as the old adage goes, is clear: if it looks like a duck and walks like a duck, it is a duck.
Historically and legally, the right to offer and regulate sports betting has been the domain of individual states. This framework was solidified by the Supreme Court’s 2018 decision to repeal the Professional and Amatuer Sports Protection Act (PASPA), empowering states to legalize the business and set their own rules.
Since then, the majority of states have embraced legalized sports betting, creating a robust regulatory environment that ensures consumer protection, prevents fraud, and generates significant tax revenue. These regulations are not arbitrary; they are designed to uphold the integrity of sports and protect the financial interests of states.
Kalshi, a platform that is looking to offer betting on the outcome of sporting events under the banner of predictive markets, argues that its offerings are legal at the federal level and fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), not state gaming regulators. However, it remains unclear whether the CFTC has already approved or will approve Kalshi’s foray into peer-to-peer sports betting. Similarly, Crypto.com has ventured into sports-related wagering, further blurring the lines between traditional sports betting and predictive markets.
The crux of the issue lies in the format of these offerings. It is not just a legal gray area; it is a direct challenge to the authority of states to regulate gaming within their borders. Bypassing the regulations that states have created to ensure accountability, transparency, and protection for both operators and consumers is a major issue. Kalshi and similar platforms contend that their predictive markets are fundamentally different from traditional sports betting. They argue that their models are based on financial principles rather than gambling and, therefore, should not be subject to state-level gaming regulations.
But this argument overlooks a fundamental truth: if you take a bet on the outcome of a sporting event, it doesn’t matter what the format is—it is still a bet on sports. Whether it’s offered as a binary option, a futures contract, or a straight wager, the underlying activity is the same.
State regulators have been clear: anyone offering sports betting must obtain the appropriate licenses and comply with state rules. These rules are not just bureaucratic hurdles; they are critical safeguards designed to protect the integrity of the industry. State regulators require operators to implement a number of checks and balances, including anti-money laundering (AML) protocols, measures to prevent match-fixing, and tools to ensure responsible gambling. These requirements are not optional—they are essential to maintaining the reputation of the business and the trust of consumers.
If platforms like Kalshi and Crypto.com are allowed to operate outside this framework, it could undermine the integrity of the entire system. It would create an uneven playing field, where some operators are subject to strict oversight while others operate with impunity. More importantly, it would expose the industry to significant risks, including money laundering, fraud, and the manipulation of sporting events.
The gaming industry cannot afford to ignore this issue. State regulators have long held that anyone offering sports betting must obtain proper licensing within each jurisdiction where they operate. The broader gaming industry—from operators to regulators—has invested significant resources in creating a stable and well-regulated market. If predictive markets are allowed to circumvent state regulations, it could set a dangerous precedent.
Other operators might follow suit, claiming that their offerings are not technically sports betting and therefore exempt from state oversight. This would erode the regulatory framework that has been carefully constructed over the past few years, jeopardizing consumer protections and state revenues.
The solution is straightforward: if a platform offers bets on the outcome of sporting events, it should be treated as a sports betting operator, regardless of the format. State regulators must take a firm stance on this issue, ensuring that all operators comply with existing laws and regulations. The CFTC and other federal agencies should work in tandem with state regulators to clarify the boundaries of predictive markets and ensure that they do not encroach on the domain of sports betting.
Ultimately, the principle is simple. If it looks like a duck and walks like a duck, it is a duck. Platforms like Kalshi and Crypto.com may dress up their offerings in the language of predictive markets, but at their core, they are offering bets on sports. As such, they must play by the same rules as everyone else. The integrity of the gaming industry—and the authority of state regulators—depends on it. Without the necessary checks and balances, the industry risks losing the trust of consumers and the credibility it has worked so hard to build.
