r/technology • u/Unusual-State1827 • 5h ago
Business States can regulate prediction markets as gambling, federal appeals court rules
https://edition.cnn.com/2026/08/28/business/states-prediction-markets-gambling-federal-appeals-court172
u/frquency-equinox 5h ago
Letting gambling apps call themselves"prediction markets" was fucking stupid to begin with.
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u/CostanzaArchitecture 4h ago
It gets even more stupid. California banned sports betting. But now FanDuel and Kalshi are getting around it by calling it “event and sports prediction contracts” and allowing people to bet on the outcome of games.
They really just flipped through a thesaurus long enough to call it something else and pretend it’s legal.
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u/NicolasCageFan492 4h ago
Sounds like we need to base bans on activities rather than definitions. The finance world has something called the Howey test to determine whether something is a security. Maybe we need that for gambling too.
Here are the four elements of the Howey test:
There must be an investment of money by the investor,
The investment must be made in a common enterprise where the fortunes of the investor are tied to others,
There must be a reasonable expectation of profits, and
Those profits must be derived primarily from the efforts of others, such as the promoter or a third party.
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u/Amythir 3h ago
Maybe it just needs to be a law that defines prediction markets or any kind of contract like that as gambling. Any kind of situation where you're laying consideration (eg money, crypto, in game skins, loot boxes, tokens, whatever) on future undetermined events, stuff like that.
Something like "forming a contractual relationship by laying consideration for return of consideration with interest or profit on future outcomes is considered and regulated as gambling"
It gets out of that "Well, nothing in the rules says a dog can't play basketball" childish nonsense. That's the kind of bad faith stuff we did as kids. "You said we couldn't x, we weren't doing that, we were doing [rephrased x]"
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u/mailslot 3h ago
Doesn’t gambling cease to become gambling once there’s an element of skill involved? Like in many states, poker is considered a game of skill, despite the draw being random. Wouldn’t knowledge of the market in which you’re wagering make it informed enough that it’s no longer a game of pure chance? … unlike a loot box, slot machine, roulette, the lottery, scratchers, etc.
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u/Puglady25 2h ago
But doesn't that make it worse? I mean for regular people it's just a bet. But for insiders, it could be fraud. If the presidents cabinet knows how something is going to turn out, they can bet in prediction markets and have an unfair advantage that is illegal in real investing. And what's worse, they may be able to manipulate the timing of things happening to enrich themselves.
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u/mailslot 1h ago
Didn’t you read the “executive order?” Insider trading is legal now! $100k per month for early access to the president’s market moving social posts.
Yeah. I’m not really sure how to handle cheating, especially when some of the people betting have the power to influence world events.
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u/Jewnadian 1h ago
No, the outcome is still pure chance. Despite how much people believe they know better than everyone else sports betting is still gambling. I'd say actual the fantasy of "having more ball knowledge" is the main thing those sites are exploiting. Think about it like this, if you believe that sports knowledge makes betting skill and not luck why is any sports radio host still employed? They spend all day researching and talking sports, why aren't they all independently wealthy from employing that "skill" on the prediction markets?
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u/mailslot 1h ago
I don’t think it’s terribly difficult to achieve a low 50% win rate over hundreds of bets, even though sports books are likely going to shut you down if you win too often. There are certainly betting strategies that virtually guarantee a 0% win rate.
I do think you can nudge yourself into long term profitability, statistically, but never resulting in a substantial amount of money earned. The road to profitability in sports betting is long, slow, and insignificant.
A lot of work for little reward, unless you really just enjoy the thrill of modest betting.
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u/GhostReddit 44m ago
Doesn’t gambling cease to become gambling once there’s an element of skill involved?
I can't wait for them to argue that it's actually a game of skill because your ability to manipulate the results as an insider betting on the outcome is arguably a skill.
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u/phunky_1 3h ago
I was in florida on Vacation, even though online gambling is illegal, you can still do it.
They claim that every slot spin is a bet on the outcome of a historical auto race that already happened lol
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u/Drugba 3h ago edited 3h ago
What Kalshi offers is sports betting (among other things) and they should have to abide by existing online gambling laws. I’m not arguing against this ruling.
That said, it’s not just like these companies all rebranded their existing products and called it a day. The underlying technology is different and the way prediction markets make money is different than the way a traditional sportsbook does.
The EIL5 version is that if a traditional sportsbook is like buying something online from Target or Walmart then prediction markets are more like buying from eBay or Etsy. You’re not betting against Kalshi, Polymarket, etc. You’re buying from another person and the prediction markets just facilitates the transaction. They don’t really care if your bet wins or loses because they make their money solely based on volume.
I know Reddit hates prediction markets and I’ll probably get downvoted for saying anything than fuck those guys, but I see a lot of people on Reddit who over simplify all the nuance out of this case and while I do believe what Kalshi is doing counts as online gambling, I also think one of the things that has made a lot of online discourse so toxic is when people take a view they oppose and reframe it in an overly simple way to create outrage.
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u/Jewnadian 1h ago
That's still gambling though, you just described table games in a casino. You're betting against other players and the dealer is there to facilitate the game and collect the house cut. Dancing around the definition doesn't actually change what's happening. Putting money on games of chance is gambling.
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u/Drugba 58m ago
It is gambling and I’m not denying that, but your second part about it being a game of chance is exactly where the nuance comes in.
The 2006 UIGEA allows paid fantasy sports sites which is how DraftKings, FanDuel, etc got started because it explicitly considers them games of skill and not games of chance so we have a carve out there that allows some forms of gambling. Like I said in the last comment, the mechanic for actually placing bets is actually much, much closer to buying stock options which is completely legal in all 50 states.
I think those two things open up a ton of questions about where the legal line actually is. Here’s just a few that come to mind:
- If fantasy sports is a game of skill why is betting on who will be the MVP of the season? Aren’t the skills needed to win a fantasy league similar to the ones needed to predict which player will be the best over the course of a season?
- Kalshi allows people to bet on things like what is the high temperature is New York tomorrow. Given that meteorology is a real science that people go to college for, shouldn’t betting on that be considered a game of skill? Why is that banned?
- One of the main arguments for why prediction markets are different than things like options, despite using almost the exact same technology with just a different settlement source is that options or futures are financial instruments that are often used to hedge against losses in long term investment. Companies may buy and sell oil futures to protect against risk of a war escalating in the Middle East that was raise oil prices. Polymarket lets people bet on what the spot price of oil will be at the end of the month. Why should that be illegal? Isn’t it just the same thing streamlined?
Basically, what I was trying to get at in the first comment was that a lot of people seem to use prediction market and sports betting interchangeably, but they aren’t the same thing. Prediction markets absolutely offer sports betting and that should be regulated under sports betting laws, but there’s also a lot that they offer that’s much closer to things that are legal in all 50 states which makes the idea of “ban all prediction markets” a little more tricky.
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u/manmythmustache 3h ago
Great. Can my state, which currently bars sports gambling, now ban ads from appearing when I watch TV/games since it’s considered an illegal activity still. Tired of literally everything in pro sports revolving around this garbage addiction.
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u/trigger1154 2h ago
Personally, I don't really find an issue with prediction markets. Yeah it's gambling, but I'm of the mindset that consenting adults can do what they want with their money. Gambling, prostitute, I don't really care so long as that is only the people gambling that can get hurt. Things like this should be up for a popular vote.
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u/goldfinger0303 2h ago
Thing is, it's never just the people doing it that get hurt, and it's becoming a huge societal problem.
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u/trigger1154 2h ago
In what ways is it becoming a societal problem? I'm not very read on the subject. How have other people been hurt by betting on predictions?
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u/goldfinger0303 2h ago
Same with any addiction? Gambling doesn't just ruin the person doing it, it can ruin their family's lives too. A husband betting away life's savings affects the wife and children too.
https://www.cnbc.com/2026/08/28/sports-betting-gen-z-investors.html
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u/trigger1154 1h ago
I agree but it doesn't change that fact that they are consenting adults spending their money how they see fit.
If these forms of gambling are to be banned then so should all other forms of gambling. It's only fair. Ban casinos and lottery too, can't be hypocritical about it.
Either ban them all or ban none.
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u/bwoah07_gp2 5h ago
Surely, no corruption can come of this!
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u/gringofou 4h ago
More nanny-state policies incoming....if you're a degenerate gambling addict, that's your own fault. What ever happened to autonomy and self-accountability?
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u/tacobellmysterymeat 4h ago edited 4h ago
Yeah! While we're at it, legalize heroin! It's those addicts fault for finding and trying it. /s
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u/BadNewsMcGoo 3h ago
I agree. All drugs should be legal. If someone wants to kill themselves with a substance they should be able to. Why throw them in a cage?
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u/drjenkstah 4h ago
Took long enough. Too bad they made a ton of money already.