The Commodity Futures Trading Commission maintains that sports event contracts differ from traditional sports betting. The CFTC chairman characterizes prediction markets as financial products and argues they should not be regulated the same as entertainment betting. Conventional sportsbooks can remove customers who keep winning, while derivatives-style markets allow participants to take earnings when they win. Prediction markets also reflect real-time customer sentiment through contract pricing that represents perceived event probability, and traders compete with each other rather than against a house. The CFTC also notes that prediction markets offer more limited sports betting options. State regulators disagree and view the contracts as effectively placing firms in the sports betting business.
"“They're different models,” Selig said. “The conventional sportsbooks and casinos are entertainment, and they have a lot of authority to be able to kick people out when they keep winning. When you go to the derivatives markets, that's not allowed. You keep winning? Great. You take your earnings.”"
"Selig pointed to other differences between prediction markets and sports betting. In prediction markets, real-time customer sentiment impacts positions on certain events, introducing market dynamics. However, sports betting odds are set by the sportsbook, Selig said. On platforms like Kalshi and Polymarket, traders compete against each other rather than trying to beat the house. The price of a contract directly reflects the market's perceived probability of that event actually occurring."
"“What you're seeing is markets versus entertainment,” Selig said. “For those that want the discipline and integrity of a market, it's a better model. For those that want entertainment, the casinos might be the model for them.” Prediction markets also feature more limited sports betting options, Selig said."
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