The CEO of a trade group representing prediction platforms, called the “Coalition for Prediction Markets (CPM),” is taking a stand against state gaming regulators.
Sean Maloney said that prediction markets believe they should be federally regulated, meaning they don’t need to achieve state-level licensing.
Key Takeaways
- Maloney defended the model of federal over state regulation for prediction markets.
- Several prominent political futures recently touted prediction platforms’ markets.
- Prediction platforms are at war with state gaming regulators in multiple states.
Maloney’s comments were delivered on Wednesday during an episode of CNBC’s “Squawk Box.”
Although Maloney did not specifically state his comments were a direct response, they come after regulators pressured platforms such as Kalshi, Robinhood, and crypto.com to remove sports event contracts from their catalog of tradable markets.
“We want strong federal regulation by the [Commodities Futures Trading Commission] so that there are clear rules and clear protections,” Maloney said. “We know there are people out there who don’t like that, but, you know, they have an economic reason to feel that way, but we just want to be part of the conversation.”
Maloney pointed out that President Donald Trump previously commented on how prediction markets said he would win the 2024 U.S. Presidential Election before the polls did.
The CPM CEO also used Kalshi as a reference for the accuracy and relevance of prediction markets, noting that New York City mayor Zohran Mamdani “is a big fan and brags about his Kalshi odds.”
Maloney’s use of the term “odds” is notable. Prediction markets and their affiliates typically tried to avoid using common betting terminology in the interest of maintaining a distinction between themselves and sportsbooks, opting for terms such as “probability” and “chance” over “odds.”
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Regulating prediction platforms
One of the most controversial developments related to prediction markets recently involved the capture of former Venezuelan President Nicolás Maduro.
Last week, an anonymous user on Polymarket walked away with $400,000 after they predicted that Maduro would soon be removed from office. The majority of that user’s trades were completed hours before President Trump announced the unexpected raid that led to Maduro being removed from Venezuela, leading many to believe that insider trading was afoot.
“That’s a very serious concern, and it’s exactly why you want U.S.-based, federally-regulated, responsible actors in the space; who already ban that type of activity; who have the type of know-your-customer rules that would tell you who made that trade, so you all could know, and if there were insider connections or improper activity going on, it would be illegal under federal law,” Maloney said. “That’s a good system, and that’s where we are fighting for.
While CPM is working for the benefit of prediction platforms, it does not represent Polymarket. Maloney said that the trade group only represents platforms in the U.S. that are "playing by the rules.”
One of his biggest concerns moving forward is finding a way to help prediction markets grow without pushing users to illegal, offshore platforms, which is the same fear that has been expressed by state gaming officials related to casino gaming and sports betting.
“What you’re seeing in the space right now is a lot of companies (deciding) that the model of federal regulation as a U.S.-based platform makes the most sense, so I think you’ll see a convergence around that,” Maloney said. “It’s important that we encourage it, because we don’t want to push folks who are using prediction markets to offshore platforms where there are not the protections we have under U.S. law. We want good, clean markets… if we get the policy right, you’ll see it converge around the healthiest form of activity that’s here in the U.S., well-regulated at the federal level.”
Legal differences escalate
The debate between state and federal regulation involves philosophical differences in how prediction platforms operate.
State regulators argue that their sports event contracts are just rebranded packages offering sports betting odds. However, prediction platforms claim that their peer-to-peer buying and selling model is different from wagering betting odds against the house.
The most recent dispute led to Tennessee sending cease-and-desist orders to several prediction operators. Kalshi responded on Monday with a lawsuit against the state’s gaming regulator, and a judge quickly ruled that Kalshi had the right to offer prediction markets for the immediate future.
