PGCB issues a warning against prediction markets

• PGCB has become the latest gambling regulator to go after prediction markets
• The watchdog has cautioned licensed operators not to partner with such platforms
• Failure to comply could mean that the PGCB would reassess a licensee’s permit to operate a gambling product in the state

Pennsylvania has become the latest state to issue a warning against its licensed gambling operators to stay away from the highly controversial if gaining steam sector involving prediction markets.

Prediction markets have surged in popularity to a point where estimates put the revenues raked in by these companies poised to hit $10bn by 2030, and EKG, a gaming analytics firm, argues that the revenue could hit $1tn, with around 60% of this figure brought in by sports event contracts.

Prediction markets surge as does opposition - Pennsylvania becomes latest frontier

It is sports event contracts precisely that are now targeted by the Pennsylvania Gaming Control Board (PGCB), which has warned operators to stay away from this "Wild West," and has joined the ranks of other gaming watchdogs around the country to have taken a similar course.

At the same time, Fanatics, DraftKings, and FanDuel have all launched into prediction markets and have even quit the American Gaming Association over a disagreement on whether they should have done so in the first place.

The PGCB maintains a familiar argument against the sector, describing prediction markets as gambling products that "masquerade" as financial instruments.

The argument stems from a simple lack of clearly-defined rules, as prediction market platforms have insisted that their products are regulated by the CFTC, whereas the PGCB, as well as other gaming regulators all over the country, including in Nevada and News Jersey - have maintained that this is simply not true the instance "sport event contracts" started appearing on their portfolios.

"This essentially creates a dual-track system where one track is highly regulated and the other is a legal Wild West," argued Kevin O’Toole, Executive Director of the PGCB, adding:

"[They] are essentially offering high-volume wagering mechanisms that operate entirely outside of Pennsylvania’s comprehensive consumer protection, responsible gaming, and tax frameworks."

Federal preemption stretched beyond its intended purposes

PGCB’s chief counsel Steve Cook also weighed in on the issue, arguing that what prediction markets were doing as of right now was to stretch "federal preemption," and push it beyond its intended purpose.

Essentially, the PGCB has cautioned companies against teaming up with prediction market platforms, drawing a parallel with what is happening with Underdog in places such as Missouri and Arizona.

In Missouri, Underdog decided not to go ahead with a planned and prepared-for sports betting launch on day zero, whereas the company is facing trouble over its partnership with Crypto.com in Arizona.

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