HomeGambling IndustryPrediction markets are not web3 versions of gambling, says lawyer

Prediction markets are not web3 versions of gambling, says lawyer

LAWS AND REGULATIONS28 Jan 2025
3 min. read
Law books

Prediction markets have come under a lot of scrutiny, assailed as forms of gambling, and the web3 answer to gambling. Yet, they are not exactly that, argues New York-based crypto attorney Aaron Brogan who makes the case for why platforms such as Polymarket are anything but gambling.

Prediction markets are not the same as sportsbooks, says a prominent lawyer

Speaking to CoinDesk, a crypto-focused media, his comments come at a time when the sector is undergoing a lot of scrutiny, with France, Thailand, Singapore, and other jurisdictions already forcing Polymarket to leave voluntarily or equating it outright to a form of gambling.

Although Polymarket and Kalshi have included sports events to some extent, they are not traditional competitors to licensed sportsbooks which are ultimately a form of gambling, argues Brogan. He attempts to distinguish the two by arguing that in the case of a sportsbook, you are betting against the users.

Sportsbooks set the odds and then offer them to their users, Brogan argues. So, in order to make money sportsbooks need to set the odds and make sure the odds allow them to make a profit, hence why a gambling license is required.

With prediction markets, however, Brogan believes that the platforms are neutral intermediaries. They do not set the odds nor take sides, but let customers bet on the outcome they want to back, and the odds are thus influenced.

For example, a prediction market has little incentive to restrict the users who win the most. Sportsbooks in contrast must ensure that they are in the black all the time by even restricting access for some users who tend to win more than what they deem "recreational bettors."

"Prediction markets aren’t gambling because they’re not structured to be. They’re tools for understanding, hedging, and creating public goods. That’s what makes them fundamentally different," Brogan’s argument runs.

Prediction markets won’t ban you for winning too much

Despite this, there is an important note to make here. Platforms such as Kalshi insist that they are prediction markets but open the Apple App Store or Google Play Store and you will see the app beckoning back to you to "bet on events," specifically using this wording to incentivize consumers to participate.

This, however, may be more of a marketing trick than any premeditated malfeasance as users are in a sense still allowed to bet on the outcome of events, it’s just that they won’t bet against the house – i.e. based on the odds that sportsbooks have set themselves.

Brogan also added in his interview that prediction markets are simply regulated differently and are within the purview of the Commodity Exchange Act.


Image credit: Unsplash.com

28 Jan 2025
3 min. read
Comments
Nobody has commented on this article yet. Be the first one to leave a comment.

Start discussion

You must be logged in to add a comment.

Sign up

Send us a tip

Would you like us to cover a specific story? Send it to us!

Latest gambling news right in your inbox

Subscribe to our newsletter and receive a weekly dose of the most important events from the gambling industry.
Stay up to date
Would you like to be notified about latest gambling news and updates?
Allow