Summary
- Better Markets joins growing criticism of prediction markets
- Non-profit argues event contracts are simply gambling in disguise
- Group questions whether regulators like the CFTC can oversee the sector
Non-partisan, non-profit organization Better Markets, set up in the wake of the 2008 financial crisis, has weighed in on the ongoing debate surrounding the nature of prediction markets. The organization has described the rise of prediction markets and the use of sports event contracts as gambling, joining the ranks of trade groups such as the American Gaming Association and Gambling Is Not Investing, and local state gaming regulators in criticizing the sector. In a detailed breakdown on its official website, Better Markets went on to state from the very start that there was no doubt, according to the organization, about the nature of prediction markets.
Questions over federal oversight
In a statement, the company said: These 'prediction markets' are just a way for people to gamble by what are called 'event contracts,' which are being offered by large financial firms such as Kalshi, Polymarket, and Crypto.com because they are trying to avoid the longstanding state regulation of gambling. Better Markets has gone a step further, arguing that the activities in question were no different in their substance than the type of products offered at casinos, sportsbooks, or a corner bookie, and prediction markets could be used to bet on anything - from the return of Jesus Christ to the Golden Globes, and sports. According to Better Markets, the aforementioned have unleashed unregulated nationwide gambling, which has not been reviewed by the responsible regulators, policymakers, or elected officials. As to the Commodity Futures Trading Commission’s (CFTC) mandate to police and regulate these markets, Better Markets argues the federal watchdog does not have the means to regulate the sector, and least of all not in 50 states, describing the activity again as gambling. Better Markets has also pointed out a decision by Congress, which states that gambling via prediction markets is prohibited, but companies continue to offer these events nevertheless. The organization similarly insisted in one of its points that Kalshi, one of the major players in the sector, and arguably the largest, has recognized Congress’s opposition: When it wanted to defend its election betting contracts, it was quick to dismiss sports betting as merely a form of entertainment, with no 'independent significance' or 'economic risks. Kalshi went further and flatly admitted that Congress did not want sports betting to be conducted on derivatives markets.
Insider Information Concerns
Not least, Better Markets has raised concern over the fact that insider information is a significant threat to these markets, and anyone with private knowledge could profit unfairly at the expense of others. Companies have now been addressing these concerns and acting tough on accounts they suspect have been abusing this type of information. A MrBeast editor was suspended from the platform for this type of offense, and military insiders in both the United States and Israel have been possibly profiteering from prediction markets by using knowledge of exact military operation dates.
