Foreign media report that prediction markets and sports betting may appear to both be wagering on game outcomes, but under the U.S. legal system, they could fall under entirely different regulatory frameworks. The core issue is not whether users are “betting,” but whether these products constitute state-regulated gambling or federally regulated financial derivatives.
The trading structures of the two types of products are different.
The article states that traditional sports betting typically involves operators setting odds directly and acting as the counterparty to users. The odds adjust according to the flow of funds, and the platform's profits are directly tied to users' wins and losses.
Prediction markets more closely resemble an exchange model. For example, if the contract price for “whether a certain team will win” is $0.63, this implies an implicit probability of approximately 63% according to the market. Buyers and sellers are matched on the platform, and if the event occurs, the contract settles at $1; if it does not occur, it expires worthless.
This is also the distinction Kalshi has consistently emphasized. The platform states that its primary revenue comes from transaction fees, rather than directly taking the opposite side of clients’ trades and assuming all the risk. As a result, prediction markets are often compared to futures exchanges, not casinos.
Betting on the same event, but with different legal classifications
The article argues that the truly complex aspect lies not in the trading format, but in regulatory classification. Kalshi, as a U.S.-regulated designated contract market, contends that its event contracts should fall under the Commodity Futures Trading Commission’s (CFTC) federal derivatives framework.
However, multiple states do not accept this argument. The core position of state regulators is that if users are essentially betting on the outcome of NFL games, then even if the product is labeled as "event contracts," it may still fall within the scope of sports betting.
This disagreement has led to multiple lawsuits. The article notes that in September 2026, New Jersey requested the U.S. Supreme Court to rule on whether states have the authority to apply their own gambling laws to sports contracts offered by federally regulated prediction markets. Previously, different courts have reached conflicting conclusions in cases involving Kalshi, and states such as Nevada have also become involved in the dispute.
This dispute affects more than just the platform.
The article states that classification differences directly affect the products and trading conditions available to users, including which authority regulates the platform, age and geographic restrictions, how client funds are managed, how markets are monitored, and whether positions can be closed before results are finalized.
Prediction markets can also cover events beyond sports, such as inflation, interest rates, elections, economic data, and regulatory decisions, making them more like a tool for trading real-world events rather than just a betting product.
As the business expands, regulators are also increasing enforcement efforts. The CFTC has handled cases involving trading on non-public information or attempts to influence event outcomes. Meanwhile, the commercial scale of prediction markets is growing. The article notes that Robinhood’s event contract revenue reached $1.56 billion in the second quarter of 2026, surpassing its stock trading revenue of $1.29 billion during the same period, with quarterly trading volume reaching 13.6 billion contracts.
The article argues that how future regulations are defined will determine whether prediction markets become more like financial exchanges or continue to be regarded by some states as sports betting.