Moderator Rebecca Darin Goldberg promised attendees of the Global Gaming Expo (G2E) session “Prediction Markets, Regulatory Oversight and Integrity” it would be more educational than contentious. But from the beginning, it was clear the majority of the panel regarded prediction markets unfavorably.
Shawn Fluharty, a Democratic Delegate to the West Virginia House of Delegates and head of government affairs with Play’n Go, said legal sports betting was a fine bottle of wine in comparison to prediction markets, which he described in terms of one his home state’s beverages.
“It’s basically moonshine,” Fluharty said. “It’s not licensed. It’s not regulated. It’s great for tailgates, maybe, but you don’t know what the hell you’re getting.”
What makes prediction markets the bane of legal gambling operators is the lack of regulation. Developed in the U.S. originally to predict presidential elections, then hedge against crop futures, they’ve evolved in recent years to include “wagering” on sporting events.
They’ve also evolved to include betting on events atypical of sports wagering
“These are things like player trades, college-transfer portals, coaches hirings, firings, some kind of asymmetric peripheral scores,” said Joe Casole, vice president, legal & regulatory affairs for IC360.
Casole stated that when a person opens an online sports betting app or a prediction market app, overseen by the CFTC (Commodities Future Trading Commission), people are going to see the same thing: the ability to wager on sporting events or player outcomes.
“Because both are available on these platforms, our conversations about the practical realities of what’s happening are so important,” Casole said.
Tres York, the American Gaming Association (AGA) vice president, government relations, said it’s instructive that the majority of state attorneys general – 45 out of 50 – are on record as being in opposition to prediction markets.
“It’s a very broad coalition,” York said. “This is obviously a states’ rights issue, state consumer-protection issue, tribal-sovereignty issue. So that’s what the states are actively defending.”
York added that 43 state or federal court issues have been brought against prediction markets. States have won 38, or approximately 88%, of them.
“This will ultimately reach the U.S. Supreme Court,” York said. “You would probably know better than I would, but I think with this significant of a circuit split, the Supreme Court is likely to take it as a result in one way or the other. At this point, the question will just be one.”
York said when states and legislators decided to legalize gambling, they studied the ramifications before passing laws and regulations. They created a regulatory agency charged with overseeing sports betting.
“And the operators that are licensed have to undergo suitability checks,” York said. “They have to pay licensing fees. They’re obviously taxed at whatever rate the legislators decide. And consumer protections are put into place.
“I think we can all talk ourselves in circles as to what the integrity side of it – I’ll leave that to Joe (Casole). States have implemented a lot consumer-protection aspects that I don’t think prediction markets have implemented, if at all, not nearly to the same extent, and it can cause a lot of a lot of harm to those people.”
Casole said that the history of gambling is littered with new innovations that might sometimes seem contentious, notably legalized sports betting outside of Nevada. But where predictions markets vary is who has control.
“Courts and policymakers will answer those questions,” Casole said.
He added that prediction markets, if they choose, can learn from regulated gaming operators what mistakes not to make. So far, they don’t seem likely to look to regulators for guidance.
But Fluharty said it’s clear to him what governing body should control prediction markets. And it’s not the federal government or a federal agency.
“The states are the adults in the room and they should be responsible for implementing gaming and policing it and putting the guardrails in place,” Fluharty said. “Not the federal government. Come on! Have you seen their polling numbers lately?”
