Are prediction markets gambling? Utah and the CFTC disagree

Prediction markets generated nearly $64 billion in trading volume last year. They allow users to trade on anything — sports, politics, the Oscars, and, controversially, U.S. foreign intervention in Venezuela and Iran — and are expected to keep booming. But prediction markets aren’t gambling. At least, not according to them.

They’re huge markets, regulated by the federal Commodities Futures Trading Commission in the same way as crude oil or Bitcoin. Those platforms claim the contracts they offer are not outright gambling. But while the CFTC has announced it’s looking into rules surrounding what should be allowed on those platforms, the state of Utah has already thrown its hat into a fight that could define how the rest of the country handles the issue in the future.

The state legislature sent a bill to Gov. Spencer Cox’s desk on March 11 that’s designed to close the pathway for prediction markets to operate in Utah, which has prohibited gambling for as long as it has been a state. Cox said he will sign the bill, comparing the ease of access to such markets to “putting a casino in the pocket of every single American.”

Kalshi preemptively sued the state in late February, asserting it had no control over its business in Utah. Those markets have faced challenges in other states, too – Arizona’s Attorney General’s office filed criminal charges against Kalshi on Tuesday alleging it constitutes an illegal gambling business.

“The question really comes down to whether you view these kinds of platforms as engaging in gambling, or you view them as engaging in some kind of financial market,” said Lincoln Davies, law professor at the University of Utah. “If it’s gambling, it’s something that has long been regulated by the states… If it falls into a financial, like the derivatives or futures, then it could fall within the jurisdiction of the CFTC.”

Both sides have made their feelings clear. Kalshi itself said in a statement to Marketplace that prediction markets are “derivatives contracts.”

“Which fall under the exclusive authority of the federal government,” the statement from a Kalshi spokesperson reads. “State regulation is for gambling companies, which operate a different business model. On Kalshi, there is no "house", meaning we do not profit from customer losses like casinos do.”

CFTC chairman Mike Selig, a Trump appointee, asserted his agency’s “exclusive jurisdiction” over prediction markets — though sports gambling, for instance, is illegal in Utah, he defined trading on prediction markets as event contracts in a Wall Street Journal op-ed.

The CFTC was initially given authority by Congress to regulate futures trading in commodities. But Davies said that Utah’s position is that it alone has the authority to decide what’s best for its citizenry.

“I think, for most people, this would look like gambling,” Davies said. “There’s a long line of cases in the courts that say… you can’t give an agency a mass power to regulate a huge industry unless Congress is specific in how they say that.”

Victor Matheson, an economics professor at College of the Holy Cross, said sports gambling exploded after a 2018 Supreme Court decision that struck down the previous federal ban. In recent years, Kalshi specifically has carved out a sizable niche in the industry — during the Super Bowl, the company reported a trading volume of more than $1 billion. In 2025, 89% of the company’s revenue came from sports.

Competitors have also gained a strong foothold in the industry. On Thursday, Major League Baseball named Polymarket its exclusive prediction market partner.

And despite those companies and the CFTC asserting trades on the platforms are event contracts and not sports betting, Matheson said that is “legal fiction.”

“It looks like sports betting, it sounds like sports betting,” Matheson said. “It’s definitely sports betting.”

On Monday, U.S. Sens. John Curtis (R-Utah) and Adam Schiff (D-California) introduced legislation that would bar prediction markets from listing contracts related to sports, as well as “casino-style games,” The Wall Street Journal reported.

Whether the courts or legislature will actually make that determination or not, Matheson and Davies said, is unclear. But additional concerns around prediction markets not being regulated at the state level revolve around ensuring integrity — in sports, but also in domains with higher stakes like politics and global conflict.

Recent scandals in legal sports betting have shown that the pervasiveness of gambling in the industry has led to more cheating. And states that allow sports betting require sportsbooks like DraftKings or FanDuel to share data and report suspicious activity, Matheson said. Both sides of that dynamic are incentivized to do so, he said — DraftKings wants to make sure its users feel comfortable with the integrity of its product or else they’ll move to one of the other many available sportsbooks, and states have a vested interest in the health of the public.

Matheson said legal sportsbooks do depend on “whales” — high rollers, many of whom are spending more than they can afford. But, at least in theory, there are state commissions providing oversight to ensure they don’t exploit at-risk bettors. There’s limited oversight for prediction markets, and less competition in the industry, he said.

“Every state (in which sports gambling) is legal has put some thought into exactly how they want that game legalized, and have a wide variety of what they think is the best way to approach that given their own state circumstances,” Matheson said. “I have no confidence in the federal government's ability to regulate sports in particular, just because they don't have any experience doing that.”

But prediction markets aren’t limited to sports. In fact, there are few limits on what users can trade — including on government decisions that move into issues of national security.

In January, a Polymarket user made a sizable, correct trade that former Venezuelan President Nicolás Maduro would soon be ousted from office. Polymarket alone has hosted more than $500 million in trades related to the war in Iran, including those related to the “removal” of Iranian leader Ayatollah Ali Khamenei that were later cancelled (Khamenei was killed in a coordinated U.S./Israel strike). A reporter for the Times of Israel was even reportedly threatened by Polymarket users over a report he made that an Iranian missile had struck Israel on March 10.

The CFTC has previously held that contracts involving terrorism, assassination, or war were prohibited in the U.S. — Kalshi itself froze bets related to Khamenei’s death — but the anonymity of these platforms can allow users to skirt those regulations.

And those bets have raised questions over whether stakeholders in U.S. policy and decision-making can use that lack of oversight to financially benefit themselves with sensitive information.

“You certainly don't want defense decisions and political decisions being made based on people having a financial stake in this,” Matheson said.

Matthew Wein, a former policy advisor for the U.S. Department of Homeland Security who runs a national security consulting service, said the insinuation that those markets are being artificially moved can undermine the fairness of markets and institutions across the board.

“People need to have trust that the markets are fair, that the markets are transparent, and that they're not they're not being abused by people who have access to non-public information or information that could sort of distort the market,” Wein said.

The argument over regulation, Davies said, will ultimately be decided in the courts.

“I think it’s clear Congress would have the power here to regulate these kinds of markets… but until Congress does that, I think it's up to the states to decide what's best for their citizens,” Davies said.