PHOENIX (AZFamily) — Prediction markets that allow users to place money on everything from a Taylor Swift pregnancy to economic forecasts are drawing scrutiny from Arizona officials concerned about regulatory gaps.
The platforms, including websites Polymarket, Kalshi and a new site from Fanatics, allow users to buy contracts on various outcomes. While prediction markets have existed for years, their recent growth online has caught the attention of state regulators.
Prediction markets are federally regulated by the Commodity Futures Trading Commission, while gambling companies face different standards that vary state by state. Victor Matheson, professor of economics at College of Holy Cross, said this creates an uneven playing field.
“The issue with these is they’re just simply not facing the same level of regulations that the FanDuels and the DraftKings and the other big players are making,” Matheson said. “Again, they’re not contributing taxes in the same way, they’re not contributing operational fees, and they don’t have all the same sort of consumer safeguards that gambling apps have.”
In recent months, two attorneys general have targeted these sites. Massachusetts Attorney General Andrea Campbell sued Kalshi for illegal and unsafe sports wagering.
In Arizona, gambling companies paid more than $112 million in taxes that prediction markets don’t have to pay.
“Attorney General Mayes is aware of the rapid growth of so-called ‘prediction markets’ and the concerns they raise around compliance with Arizona laws,” the Arizona Attorney General’s Office said in a statement. “While we can’t comment on any specific company or the potential for litigation, the Attorney General’s Office is closely monitoring how these products are being offered to the public and any efforts to sidestep existing regulatory safeguards. Our office takes very seriously any business model that may expose Arizonans to hidden risks or attempt to evade state law.”
The Arizona Department of Gaming has issued cease-and-desist notices to multiple national platforms, including Kalshi, accusing them of offering unlicensed event wagering to Arizonans.
“The Department has serious concerns about the rapid growth of unlicensed event wagering on prediction market platforms targeting Arizona users and the significant threat they pose to Arizona’s carefully constructed regulatory framework governing gaming,” the department said.
Recovery experts are concerned about the rise of prediction markets, labeling them a gambling rebrand. The CEO of Kalshi says it’s not gambling at all.
Sports wagering is legal in Arizona, and resources are available for people who struggle with gambling addiction, including a hotline at 1-800-NEXT-STEP. People can also self-exclude from gambling apps or sportsbooks.
However, prediction markets are regulated only by the federal government as a financial instrument, so no state resources are yet available for people struggling with addiction to these platforms.
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