Are prediction markets just unregulated casinos in disguise?
Prediction markets are facing sharp criticism for operating like unregulated casinos. Benjamin Schiffrin, Director of Securities Policy at Better Markets, argues that these platforms exploit legal loopholes to avoid gambling laws. His recent study, Predictably, 'Prediction Markets Are Just Casinos', claims the industry preys on vulnerable bettors while bypassing state oversight.
Prediction markets allow users to bet on yes/no outcomes, from election results to financial trends. Schiffrin insists these platforms resemble casinos more than financial tools. He highlights that success often depends on luck rather than skill, especially without insider knowledge.
The Commodity Futures Trading Commission (CFTC) currently oversees prediction markets, permitting them to operate nationwide without approval from state gaming regulators. Schiffrin argues this oversight is misplaced, as the CFTC lacks expertise in managing gambling risks. Several judges have agreed, ruling that prediction markets function no differently from traditional betting. Kalshi, a major prediction market platform, now faces a class action lawsuit. Plaintiffs allege the company targeted users with problematic betting behaviours. Schiffrin's research also reveals that typical bettors are young men, a group particularly susceptible to harmful gambling habits. Unlike traditional stock markets, prediction platforms don't reflect real economic activity, Schiffrin contends. He accuses the industry of rebranding gambling as 'prediction markets' to dodge stricter state yahoo finance laws.
The debate over prediction markets centres on their legal status and impact on bettors. With lawsuits mounting and regulators under scrutiny, the stock market today may face stricter controls. Schiffrin's findings suggest these platforms operate more like casinos than financial services, raising questions about their long-term viability.
