Prediction market platforms Polymarket and Kalshi are spending a lot of time and money trying to convince regulators that they are not gambling.

Outside the US authorities view prediction markets as synonymous with gambling. Taiwan, France and now Singapore have all taken steps to block users from accessing Polymarket at the ISP level, calling the prediction market platform some form of unlicensed gaming operation.

Prediction markets are investment tools where traders take a position on the outcome of a question.

Parties and counterparties have different opinions about how to price the competing sides of the issue, and the market engages in price discovery. If the event occurs, each share will be worth $1, or $0 if the event does not occur.

This is not a game of chance. Prediction markets are not considered gambling (in the US) because they are designed as tools to predict outcomes based on probabilities, rather than games of chance. The house does not set odds or win. It is about market participants.

In the US, the Commodities Futures Trading Commission sees its role as regulating prediction markets because it views the markets as a collection of event contracts, similar to weather derivatives – not a new invention – used by farmers to hedge against crop losses by buying into contracts that payable in case of freak weather. Climate change has made this a lucrative field.

Both Polymarket and Kalshi have had their own battles with the CFTC. Polymarket decided, Kalshi won. As a result, Kalshi is now permitted to offer choice-based arrangement contracts; Polymarket must block US users from accessing its platform. Kalshi now also has Donald Trump Jnr. as an adviser helping his cause with regulators.

Election-based event contracts were big business during the 2024 election. Looking back at how the market reacted to Donald Trump’s eventual victory, they can be seen as financial instruments to prepare for a post-election market.

Given bitcoin’s “Trump Bump,” a significant price correction can be expected if his rival Kamala Harris won, so crypto traders would want to hedge their holdings with predictable market positions.

Polymarket’s naysayers bet wrongly on the platform’s death after the election. Data showed that by all accounts the platform did well after the election: $1.6 billion in monthly volume.

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But much of that volume comes from sports-themed prediction market contracts. Data from Polymarket Analytics shows that there is currently over $1.1 billion in volume betting on the outcome of the NFL Super Bowl; $740 million on the result of the Champions League; and $700 million on the winner of the NBA Finals.

There is no macro-level significance to the outcome of a sporting event. Unlike an election, a war, or a decision by a Fortune 500 company to acquire a rival (or add bitcoin to its balance sheet), there are no broader economic or societal consequences to the outcome of the NFL Super Bowl.

In other words, it is very similar to online sports betting, which took a lot of effort to legalize and has its own set of strict licensing requirements. Online gaming operators spent a considerable amount of money to establish – and legalize – this market, with traditional casinos such as MGM playing catch-up.

In jurisdictions such as Singapore that have online, licensed sportsbooks offering sports betting, it is clear to initiate a ban. In the US, state-level gambling regulators may be next to take a look, perhaps prompted by online sports betting giants legalizing an industry that was once outlawed.

This does not mean that there is no room for sports-themed market contracts.

The NFL’s broadcast rights are worth more than $100 billion, and streamers such as Amazon and Netflix are trying to get into sports, making predictable market contracts on things like NFL ratings a useful tool for stockholders in media companies to determine whether an investment in broadcast rights was worth it.

The possibilities are endless.

Or maybe Polymarket should just move to Canada since Ontario allows both political and sports betting. Sometimes the smartest bet is on a change of scenery, and there isn’t a prediction market for that.