US Gaming Chiefs Call for Harsher Action on Prediction Markets

The wave of prediction markets is growing, causing quite a stir in the US. Lawmakers and tribal representatives in the US gaming sector are pushing to curb the rapid expansion of these platforms, and this has become more than just a regulatory issue – it’s a full-blown political and economic fight.

Industry experts are urging regulators and licensed operators to act more proactively. It's not just about reacting to developments, but about taking an offensive stance.

Numbers and facts

At a conference in San Diego, government officials, regulators, and tribal stakeholders met to discuss the growing influence of prediction markets and their potential impact on existing gaming structures. Shawn Fluharty, head of the National Council of Legislators from Gaming States (NCLGS), predicts a legal dispute up to the highest level. He suggested that the US Supreme Court may have to decide whether federal regulators even have jurisdiction over prediction markets.

If federal oversight is denied, the debate is expected to return to the states. Fluharty is confident that current laws support the regulated gaming industry. He expects that if prediction market operators lose in court, they will likely intensify lobbying efforts in state legislatures rather than seek licenses under existing gaming systems. Some of these companies are already building a presence in state capitals to be prepared for all eventualities.

Of particular concern are imbalances in taxation. For example, one state allowed prediction markets with significantly lower tax rates than those applied to licensed sports betting operators. Such disparities could cost states considerable revenue and disadvantage companies that adhere to stricter rules.

Meanwhile, Michael Selig, the new chairman of the Commodity Futures Trading Commission (CFTC), has taken an opposing stance. He vehemently defends prediction markets and sports event contracts, stating that the commission should support legitimate innovations in these markets.

"It's time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets." – Michael Selig, CFTC Chairman

He has ordered the withdrawal of a proposed ban on political and sports-related event contracts from 2024, as well as an internal advisory note on prediction markets issued last September. Selig criticizes that previous efforts to create clarity have only led to uncertainty. He emphasized that prediction markets are not a new phenomenon and have operated within the CFTC's regulatory parameters for over two decades now.

Background

The criticism of prediction platforms also stems from concerns about youth protection. Lawmakers fear that these markets could provide access to minors who are excluded under traditional gambling laws. This creates risks for 18 to 20-year-olds who are normally kept away from regulated betting markets.

According to industry representatives, the public is increasingly confused. Many consumers do not understand what legal betting is. The risk is that problems in loosely regulated markets could tarnish the reputation of the entire sector. Concerns also arose regarding controversial offerings, such as markets based on geopolitical events and accusations of insider trading. Regulators in Nevada have taken a leading role here and serve as a reference point for other states.

In response to the pressure, Kalshi and Polymarket announced new measures to curb insider trading and market manipulation. Kalshi is introducing technological safeguards that will preemptively block politicians, athletes, and other relevant people from trading in certain political and sports markets. Polymarket is formalizing its insider trading rules to prohibit trading on stolen confidential information, illegal tips, and by individuals who can influence the outcome of an event.

Why it matters for German players

For German players, the developments in the US are interesting but have no direct impact on the local market. In Germany, the State Treaty on Gambling 2021 (GlüStV 2021) is decisive. This treaty has established clear rules for online gambling. These include strict betting limits of 1 Euro per spin on slot machines and a monthly deposit limit of 1,000 Euro, controlled via the central monitoring system LUGAS.

Licensed casinos in Germany must comply with these requirements and are supervised by the Joint Gambling Authority of the States (GGL). Providers listed on the GGL's whitelist guarantee that player protection and transparency are paramount. Offers that do not comply with the German license, such as Curacao or MGA casinos, are illegal in Germany. The German legislator has made a clear commitment to a regulated market where player protection is a priority and opaque products like certain prediction markets have no place.

What it means for GGL-licensed casinos

The debate in the US underscores the importance of a strongly regulated gambling market, as Germany has established through the GlüStV 2021. GGL-licensed casinos benefit from clear guidelines that build player trust and ensure fair competition. Unlike in the US, where federal and state jurisdictions are still contentious, Germany has a central supervisory authority, the GGL. This ensures uniform and strict enforcement of rules.

For GGL casinos, this means high legal certainty, but also the obligation to strictly adhere to the regulations. The discussion on youth protection and transparency, which is being conducted in the US, has already been addressed in Germany through comprehensive measures such as LUGAS and the 1,000 Euro deposit limit. This prevents unregulated products or opaque business models from undermining the market and damaging the reputation of the entire industry.