As the first 48-team World Cup progresses across North America, the most consequential contest in the gaming sector is not on the pitch.

It is the regulatory rivalry between CFTC-regulated prediction markets, Kalshi and Polymarket, and the state-licensed sportsbooks that have dominated US wagering since Murphy v. NCAA returned the question to the States in 2018. This tournament is the clearest case study yet of why the prediction-market model is winning.

The structural advantages

The decisive edge is jurisdictional. Prediction markets classify their products as “swaps” under the Commodity Exchange Act, placing them under the exclusive federal jurisdiction of the Commodity Futures Trading Commission rather than 50 separate state gaming regulators.

The practical consequences are profound. Kalshi operates in roughly 43 states plus DC, including California, Texas, Georgia and Florida – major World Cup host markets where traditional sportsbooks remain illegal. On 6 April 2026, the Third Circuit became the first federal appellate court to affirm that the Commodity Exchange Act (1936) likely preempts state gambling enforcement against these contracts.

The economic model compounds the regulatory advantage. Exchanges run peer-to-peer order books and charge transaction fees rather than embedding a bookmaker’s vig, so prices reflect genuine consensus probability. Participants can exit positions mid-match. The minimum age is 18, not 21. And the tax treatment is potentially gentler: gains may qualify for Section 1256’s favourable 60/40 capital-gains treatment, though the IRS has issued no formal guidance and the classification remains contested; whereas bettors now face ordinary-income treatment and a 90% loss-deduction cap under the 2026 rules. Crucially, exchanges pay none of the state gaming taxes (ranging from 10% to over 50%) that licensed operators must absorb.

The World Cup as proof of concept

The numbers validate the thesis. DeFi Rate projects more than $2.5bn in World Cup trading across prediction markets, with Kalshi alone modelled at $1.47bn, surpassing March Madness. Polymarket and Kalshi together drew over $2bn in their tournament-winner markets before the opening kickoff.

FIFA itself chose an official prediction-market partner, and in the US people can use it through Fanatics on a Crypto.com exchange, a level of institutional approval unimaginable two years ago. The American Gaming Association now estimates states have lost over $1bn in tax revenue, the price of regulatory asymmetry.

Can the model be replicated in Europe?

Honestly, this system does not work well outside its home country. Its main strength depends on having one national commodities regulator with overriding powers, and Europe does not have that kind of setup. Its entire advantage rests on a single federal commodities regulator with preemptive authority, a structure Europe lacks. The EU has no harmonised prediction-market framework and no MiFID II (Markets in Financial Instruments Directive – Directive 2014/65/EU) classification for event contracts. Gambling regulation remains a matter of national law. The result has been a wave of prohibitions: Regulators in Belgium, Cyprus, France, Germany, Greece, the Netherlands, Poland, Portugal, Romania, Switzerland and Ukraine have classified these platforms as unlicensed online gambling.

The financial-instrument route offers no easy escape. Where the underlying event is financial, contracts resemble binary options, which European Securities and Markets Authority (ESMA) banned for retail investors in 2018. Where it is sporting or political, the contract falls outside MiFID II and back into national gambling law.

The UK illustrates the same dead end from a post-Brexit perspective. Some legal commentators argue operators might fit within existing financial-derivatives frameworks, yet the FCA, which made the EU’s binary-options ban permanent in UK law in 2019, characterising such products as “gambling products dressed up as financial instruments” works against that argument. The Gambling Commission, for its part, has stated that prediction markets offered to British consumers require a Gambling Act 2005 licence, most likely as a betting intermediary, the same category as betting exchanges such as Betfair.

Replication is therefore conceivable only via licensed jurisdictions such as Malta or Gibraltar, or eventual EU-level harmonisation under the Digital Finance Package. Until that happens, Europe’s patchwork of national gambling laws makes the American model impossible to replicate.