Why Courts and Congress Should but Won’t Outlaw Prediction Markets

Session Title

Regulation: Integrity, Policy & Emerging Issues

Presentation Type

Paper Presentation

Start Date

26-5-2026 12:00 AM

Abstract

The current confusion over prediction markets, mainly trading in futures on sports events, starts with society’s historic antipathy toward gambling. State legislatures passed statutes outlawing everything that looked like gambling. Following the Industrial Revolution this created conflicts with certain commercial activities, which actually served valuable public purposes. Among these were insurance, auctions and trading in securities and commodities. Courts struggled with these state restrictions until the Depression forced Congress to act. Beginning in 1933, federal statutes expressly exempted trades on nationally regulated markets from state anti-gambling laws. However, the items must meet specified criteria. Courts are now faced with the question of whether prediction markets meet those criteria. Even who should decide – courts or federal regulatory agencies – is in dispute. Courts should rule them illegal not only because they are, but also to protect states like Utah from being forced to have sports betting and states like Nevada being forced to have unregulated sports betting. But the wild card is the Trump tie-in, including naming Kalshi insiders as federal regulators. Not until Trump is gone will the right of states to make their own decisions about gambling once again prevail.

Author Bios

Prof. Rose is recognized as one of the leading experts on gaming law. Harvard Law School educated, he has written more than 2,000 books, articles and columns, including Gaming Law in a Nutshell, Internet Gaming Law and Gaming Law: Cases and Materials, & his trademark Blog, Gambling And The Law. A consultant to governments and industry, he has testified as an expert witness in administrative, civil and criminal cases in the US, Australia, Canada, France and New Zealand. www.GamblingAndTheLaw.com

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May 26th, 12:00 AM

Why Courts and Congress Should but Won’t Outlaw Prediction Markets

The current confusion over prediction markets, mainly trading in futures on sports events, starts with society’s historic antipathy toward gambling. State legislatures passed statutes outlawing everything that looked like gambling. Following the Industrial Revolution this created conflicts with certain commercial activities, which actually served valuable public purposes. Among these were insurance, auctions and trading in securities and commodities. Courts struggled with these state restrictions until the Depression forced Congress to act. Beginning in 1933, federal statutes expressly exempted trades on nationally regulated markets from state anti-gambling laws. However, the items must meet specified criteria. Courts are now faced with the question of whether prediction markets meet those criteria. Even who should decide – courts or federal regulatory agencies – is in dispute. Courts should rule them illegal not only because they are, but also to protect states like Utah from being forced to have sports betting and states like Nevada being forced to have unregulated sports betting. But the wild card is the Trump tie-in, including naming Kalshi insiders as federal regulators. Not until Trump is gone will the right of states to make their own decisions about gambling once again prevail.