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Abstract: 

This article analyzes the rapid emergence of prediction markets, including Kalshi and Polymarket, and the unresolved legal battle over whether they should be regulated as financial derivatives or as gambling platforms. Following the Supreme Court’s decision in Murphy v. National Collegiate Athletic Association, legalized sports betting has expanded rapidly in the United States. The latest innovation in this space is the “prediction market,” which transforms outcomes of political, economic, and sporting events into contracts that can be traded. Prediction market companies argue that such exchanges operate within the exclusive jurisdiction of the Commodity Futures Trading Commission, while state gambling regulators contend they are functionally unlicensed sportsbooks that should be subject to state regulation. The article further examines the difficulty of applying traditional insider trading doctrine to prediction markets, where participants may possess outcome-related information but lack fiduciary duties typical of securities markets. Absent clear regulatory guidance, enforcement may increasingly rely on federal fraud prosecutions based on terms of service.

Keywords: Kalshi; Polymarket; Crypto.com; PredictIt; N. Am. Derivatives Exch., Inc. v. Nevada Gaming Control Bd; “Insider Trading” in Prediction Markets

Affiliations:  1: Morvillo Abramowitz Grand Iason & Anello PC; 2: Morvillo Abramowitz; 3: Morvillo Abramowitz.