Super Bowl and the Rise of Prediction Markets

The Super Bowl is just around the corner, and that usually means a time for excitement, socializing, and enjoying ourselves.

But, on the flip side, there’s the growing presence of gambling, especially with prediction markets like Karshi and Polymarket becoming more popular. A landmark 2018 Supreme Court ruling removed the federal ban on sports betting, opening the floodgates for what was once only found in Las Vegas or select Indian reservations. Since then, we’ve seen a steady increase in betting activity, especially in the past year.

As we approach 2025, platforms like Calci and Polymarket have significantly changed the landscape of American gambling. By exploiting loopholes and the lack of enforcement from federal authorities, these services now allow anyone with a smartphone to place bets, even in states where such activities are illegal. It’s not just a small trend; the scale of these changes is massive.

During the NFL playoffs, for example, Calci and Polymarket reported a staggering contract value of around $6 billion within just one week. And this betting surge isn’t just confined to sports; prediction markets are now ingrained in many facets of American culture. CNN, for instance, has partnered with Kalshi to feature their markets, sharing betting odds during events like the Golden Globes.

Yet, many Americans might not be aware that these platforms operate contrary to long-established rules governing online gambling, which are there to protect consumers and allow states to set their own regulations.

These prediction markets often claim they aren’t actually gambling sites, arguing instead that they’re akin to federally regulated futures markets. Kalshi, for example, doesn’t dispute that it offers sports betting but insists it’s covered under federal guidelines. It’s puzzling how state laws seemingly don’t apply.

This situation is troubling. Kalshi’s marketing explicitly promotes itself as a betting app, encouraging users to participate in NFL bets across all states. But instead of focusing on agricultural products like a typical futures market, it primarily profits from sports betting.

There’s evidence that states are pushing back. A bipartisan coalition of state attorneys general has taken legal action against Kalshi. Some lawsuits have produced victories, such as a Massachusetts judge who issued a preliminary injunction preventing Kalshi from handling sports-related bets. Contrastingly, a federal judge in Nevada ruled that Kalshi falls under state gambling regulations and must comply, stating, “These are sports bets, and everyone who watches it knows that.” However, such rulings are still limited to a handful of states, leaving many legal battles ongoing.

This dispute isn’t just about who gets to govern; it has real implications. Eighteen states have opted not to legalize online sports betting, citing concerns over the social costs, like addiction. Even the potential tax revenue feels uncertain. For instance, one report suggests that in Texas, legalizing sports betting might only contribute a trivial 0.31% to education funding, risking serious harm to millions of residents.

The states that have legalized gambling assumed they could implement regulations like age restrictions. But now, states that have chosen to prohibit sports betting find it slipping through their fingers anyway. Legalized operators can bypass essential safeguards, allowing uncontrolled online gambling 24/7.

Surprisingly, Congress seems largely inactive, even though a straightforward solution exists. Lawmakers could clarify that sports betting doesn’t qualify under the futures contracts regulated by the Commodity Futures Trading Commission. This change would mean that prediction markets would require state licenses and have to adhere to state regulations and taxation to remain operational.

If Congress chooses inaction, many could find themselves caught in the web of what are marketed as futures contracts. This wouldn’t eliminate prediction markets but instead would compel them to acknowledge their true nature as gambling platforms. While America values personal freedom, certain vices, like gambling, should be regulated closely due to their potential for harm, just like smoking or alcohol. It’s high time we recognized that reality.