The Executive Director of the Pennsylvania Gaming Control Board (PGCB) has written a letter to the Commonwealth's two US Senators and 17 members of Congress, in which he addressed DC lawmakers and urged them to help the state preserve its hard-fought-for sports betting and gaming industry that is under increasing threat from the so-called prediction markets sector.
PGCB head urges DC lawmakers to weigh in on the debate on prediction markets
In his letter, Kevin F. O’Tooleasks lawmakers to urge the Commodity Futures Trading Commission (CFTC), the regulator that currently oversees platforms such as Kalshi, to look into the issue with such platforms offering what O’Toole believes "purported futures trading on sporting events under the façade of federal regulation."
In other words, the PGCB chimes in with other regulators who have accused Kalshi, among others, to be treading on sports betting territory without undergoing the same vetting process. Kalshi has rebuffed those claims, arguing that it is subject to federal regulation by the CFTC.
Furthermore, the platform insisted that if the sports betting vertical had issues keeping up with event-based contracts, it had mostly to do with the fact that platforms such as Kalshi simply offered a superior product, as attested by the company’s boss, Tarek Mansour, in a recent appearance on Bloomberg.
Yet, O’Toole is just one of the regulators to not meet eye-to-eye with Mansour, and his fellow prediction market top brass.
"Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim not to be gambling under state law. These markets effectively create a backdoor to legalized sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight," the regulator said.
O’Toole further explained that there was an inherent difference in the way sports betting and future markets were regulated. The CFTC’s framework, he argued, was designed to cover derivatives markets and involve sophisticated institutional participants. O’Toole and prediction markets hardly see eye-to-eye
"In contrast, state gaming regulators prioritize consumer protection for the public, implementing detailed measures for responsible gaming, age verification, and problem gambling prevention," O’Toole explained.
For its part, platforms such as Kalshi have already fought back accusations that they are using roundabout ways to usher in sports gambling without meeting regulatory prerequisites. Kalshi is engaged in legal fights in Ohio, Massachusetts, New Jersey, and Nevada, with more state regulators lining up to challenge the platform.
Yet, the chances of seeing prediction markets stop offering sports betting products are slim, as recently, the owner of NYSE, Intercontinental Exchange,invested $2bn in Polymarket, a Kalshi rival, which his poised to reenter the market.
