Better Markets Director Labels Kalshi and Polymarket as Unregulated Gambling Sites
Background on Better Markets and Its Perspective
Better Markets is an independent nonprofit organization established after the 2008 financial crisis, with a goal of increasing public understanding of financial issues. Recently, Benjamin Schiffrin, the organization’s director of securities policy, shared strong criticisms of prediction market platforms like Kalshi and Polymarket, describing them as essentially unregulated gambling operations.
Prediction Markets Compared to Casinos
In a report titled “Predictably, ‘Prediction Markets’ Are Just Casinos,” Schiffrin argued that these platforms mislead users by branding themselves as prediction markets while operating as unregulated gambling sites. He pointed out that these platforms often evade gambling laws designed to protect consumers, monitor for manipulative betting, and prevent illicit activities. According to Schiffrin, the use of the term “prediction markets” is a tactic to avoid these regulations.
Schiffrin further stated that despite claims by these platforms, prediction markets do not have any special ability to forecast future events such as elections or sports results. Most users have no greater insight than the general public, while insiders with privileged information may exploit these sites for profit. This creates opportunities for insider trading and unfair advantage.
He emphasized that legitimate markets are highly regulated to ensure fairness, prevent conflicts of interest, and guarantee transparent transaction processes. In contrast, prediction market platforms lack these regulatory safeguards and oversight, which can create risks for participants.
Regulatory Challenges and Court Actions
The current regulatory authority overseeing prediction markets is the Commodities Futures Trading Commission (CFTC). Kalshi and Polymarket have claimed they fall under the CFTC’s jurisdiction, allowing them to operate across all 50 states without needing approvals from individual state gambling regulators.
However, Schiffrin contends that the CFTC is not equipped to properly regulate prediction markets, which he views as a new form of gambling. This perspective has been supported by recent court rulings. For instance, a Suffolk County Superior Court judge in Massachusetts recently ordered Kalshi to stop offering contracts on sports events in the state, marking a significant legal setback for the platform.
Call for Stricter Regulation
Schiffrin concludes that lawmakers should recognize prediction markets for what they truly are: unregulated and continuous gambling platforms. To protect the public, he urges that these operations be regulated under gambling laws, aligning with judicial decisions. This approach, he argues, is necessary to prevent harm and ensure consumer protection before issues escalate further.
