The emergence of online prediction markets in the United States has sparked heated debate over their regulation, with proponents arguing they are not traditional gambling but rather 'event derivatives', and critics warning that these platforms normalise betting, exacerbating problem gambling. This dichotomy is playing out on a national stage, as companies like Kalshi and Polymarket operate under federal oversight by the Commodity Futures Trading Commission (CFTC), despite facing lawsuits from state regulators who claim they fall under existing state laws.
US lawmakers and regulators are engaged in a high-stakes battle over the definition of these platforms. Former President Donald Trump has weighed into the debate, stating that maintaining 'exclusive authority' for the CFTC to regulate prediction markets is 'critically important', describing it as a 'major Industry' that must be protected. In response, a CFTC spokesperson reiterated the agency's position that Congress granted them 'exclusive jurisdiction' over swaps, including prediction markets, to prevent a patchwork of conflicting state laws.
However, addiction psychiatrists and gambling researchers are sounding alarm bells about the impact of these platforms on public health. They argue that increased accessibility and normalisation inevitably lead to greater participation and subsequently more problems. Timothy Fong from UCLA's Gambling Studies Program highlighted the disparity in funding for problem gambling prevention and treatment compared to tobacco and alcohol-related harms, which are significantly better resourced.
The lack of dedicated federal funding for gambling addiction prevention or treatment is a major concern, particularly given the sector's rapid growth. Currently, public health bodies face an uphill battle addressing the societal impact of digital betting in areas where support services are scarce due to limited public funding and strict state laws prohibiting traditional gambling.