You can’t handle the trade! As state regulators and prediction markets invoke their best Tom Cruise and Jack Nicholson impressions, a flurry of legal action has taken gaming by storm in recent weeks.
Due to unfavorable rulings in Nevada, Utah and Michigan – among others – the likes of Kalshi, Polymarket and Robinhood have fallen behind in the race for regulatory approval. In spite of efforts made by the Commodity Futures Trading Commission (CFTC), US courts have begun siding with states rather than expand the already outstretched presence of prediction markets.
The lack of approval from courts has done little to slow prediction market momentum in the US, however, illustrated by collaborations involving LeBron James, Sydney Sweeney and various professional sports franchises.
Global Gaming Insider delves into the most noteworthy rulings handed down across the US, as well as if additional hits taken by prediction market operators could affect one of the most crucial periods in gaming.
Legally flawed: Prediction market rulings come in from across the US
Beginning in late August, the detrimental rulings to prediction market operators started with the Ninth US Circuit Court of Appeals prohibiting Kalshi from filing enforcement action against Nevada regulators.
Kalshi was previously banned from offering prediction market services in Nevada during July, while the Appeals Court believed the Commodity Exchange Act was unlikely to pre-empt state regulations which may apply to sports event contracts.
Nevada represents a key victory for states’ fight against prediction markets, as many believe the ruling could have nationwide implications on the legality of sports event contract trading.
While a Philadelphia court had ruled against New Jersey regulators and opened the door for extended prediction market growth in April, state lawmakers can begin citing the Nevada decision in hopes of winning their own respective battles with operators.
Bill Miller: This ruling is a significant win for consumer protections and taxpayers. It is a big loss for Kalshi and other backdoor sports gambling operations who defy state law
Almost immediately after the Nevada ruling was brought forth, New Jersey lawmakers filed an inaugural petition with the US Supreme Court to determine whether prediction markets can legally offer sports-related event contract trading without following state gaming regulations.
Furthermore, rulings in both Utah and Michigan have worked in favor of state regulators, exemplified by Robinhood Markets choosing to pull sports event contracts out of Michigan until litigation is eventually settled.
Operators remain on the offensive though – with Underdog filing legal action against New Mexico, Ohio, Massachusetts and Wisconsin in recent days. Following IG Group’s $1.3bn acquisition of Underdog at the end of July, perhaps the operator’s bark now comes off a bit louder in state court battles.
Ultimately, the legality of prediction markets – and sports event contract trading in particular – will have to be settled on the Supreme Court level, although such entities appear to see little need to pause their momentum for the time being.
Big faces in big placements: Prediction markets recruit celebrities, sports stars
In the midst of such high-profile legal battles across the US, some prediction markets have taken the approach of collaborating with talent that may supersede the spotlight focused on their legal uncertainty.
On September 8, NBA star LeBron James formed a new partnership with Polymarket – helping to promote the operator’s new headquarters in New York. Within the social spot, former NFL players Eli Manning, Reggie Bush and Richard Sherman all take part in the promotion, alongside filmmaker Spike Lee, MLB star Derek Jeter and former NBA athlete Rajon Rondo.
The push for such A-list talent perhaps shows a glimpse into the strategic mindset of Polymarket – one where greater social acceptance of the product could result in more favorable legal cases. While lawmakers will certainly continue seeking regulatory enforcement, causing a greater stir amongst the most vocal audience – young adults and sports fans – could force those prepping for upcoming midterm elections to adhere to a more compromisable outcome.
Just 24 hours after Polymarket’s full collaboration with James hit the big screen (social media), Novig brought on actress Sydney Sweeney as an equity investor, as well as launched a new advertisement campaign to promote the operator’s “just sports” approach.
In a rather no-nonsense approach from Novig, the operator chose to heavily market contracts tied to sports such as basketball, football, tennis, soccer, baseball, golf and hockey, rather than focus on those related to war, death or politics. Throughout the video, Sweeney is strategically clothed with nothing but various sports equipment, perhaps a subtle nod to the assets both parties bring to the table.
On social media, Novig CEO Jacob Fortinsky even went as far as to describe contracts tied to war, death and politics as “controversial markets that make headlines but are ultimately just conduits to trade on what people really care about: sports.”
Even when prediction market operators mirror advertising and legal strategy at times – it appears they’ll always butt heads in the same way two Hollywood stars battle for screen time. With state lawmakers and prediction market operators situated in opposing locker rooms, perhaps the first side to work as a team will be the one to come out victorious in this unceasing fight.
Will recent court rulings derail prediction market growth in the US?
It’s difficult to argue prediction market momentum will slow when figures such as James and Sweeney have begun attaching themselves to operators, even if gaming regulators from across the industry celebrated the Nevada decision.
“The Ninth Circuit’s unanimous decision confirmed state and voter choice about sports betting in their communities,” American Gaming Association (AGA) President & CEO Miller said.
“The AGA applauds Nevada’s leadership for protecting and preserving the state- and Tribal-regulated gaming framework. This ruling is a significant win for consumer protections and taxpayers. It is a big loss for Kalshi and other backdoor sports gambling operations who defy state law.”
Even with the losses suffered by Kalshi in court, it’s not as if the operator’s growth has slowed to a halt along with the defeats.
The push for such A-list talent perhaps shows a glimpse into the strategic mindset of Polymarket, one where greater social acceptance of the product could result in more favorable legal cases
To counter Polymarket and Novig’s high-profile partnerships, Kalshi formed its own collaborations with the US Open, The Weather Company and multiple MLB franchises in the days surrounding the Nevada ruling.
Inspired by the New York tennis major, state lawmakers and prediction market operators continue firing return after return toward one another, with no end in sight as to who will win the latest set.
If rulings continue to fall in the favor of US states, it will be difficult for the Supreme Court to eventually provide a ruling which allows for the same level of regulatory freedom prediction markets have enjoyed up to this point.
In the meantime, though, event contract trading will march on as the hottest blockbuster in town, with box office numbers – playing the role of trading volume – preparing to reach new heights as football season takes centerstage.
Kalshi formed a new partnership with The Weather Company to verify outcomes on related markets in August and integrate real-time data within The Weather Channel application and website
