<\/p>\n
Regular stock exchange observers will know all about prediction markets. Users buy and sell contracts that pay a fixed sum if a specified event occurs \u2013 a sports team wins a match, a candidate is elected.<\/p>\n
The price at which such a contract trades represents the collective estimate of the probability of the event. It resembles a bet in function and a derivative in form. Whether the law classifies it as the one or the other has consequences that extend well beyond the circle of specialists.<\/p>\n
Lawmakers and courts in the United States and Europe are currently grappling with this issue.<\/p>\n
The wager on public events is not a novelty: betting on papal conclaves to select a new pope was so widespread in 16th-century Rome that Pope Gregory XIV prohibited it in 1591 under pain of excommunication, exclusion from the church.<\/p>\n
What is new is the scale of the phenomenon and the claim that accompanies it.<\/p>\n
Pope Gregory XIV banned betting on papal enclaves. Wikipedia<\/p>\n
Kalshi, the principal regulated operator in the US, approached an annualised trading volume of US$50 billion (\u00a337 billion) in early 2026.<\/p>\n
The operators\u2019 legal argument is simple: they are not bookmakers but financial exchanges, their products are derivatives regulated at federal level, and state gambling laws therefore cannot reach them.<\/p>\n
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CONTINUE READING BELOW<\/p>\n
US courts are openly divided on that argument.<\/p>\n
In April this year the Third Circuit, an appeals court which covers the states of Pennsylvania, New Jersey and Delaware, accepted that a contract on a sporting result is a federal issue.<\/p>\n
Since any major sporting event carries economic consequences, and is a federally licensed exchange listing, it falls under the exclusive jurisdiction of the national derivatives regulator.<\/p>\n
However, on August 28 the Ninth Circuit, which rules in nine other states, Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington, rejected that view.<\/p>\n
Financial law, the court observed, governs contracts tied to things that can be measured \u2013 interest rates, prices, even the weather or inflation. Who wins a football game is not a measurement \u2013 it is a result, the court said.<\/p>\n
The court then looked at what the product actually does \u2013 wagers on which team wins and by how many points, combined for a larger payout \u2013 and found precisely what a sportsbook or bookmaker offers.<\/p>\n
Invoking Shakespeare, the panel concluded that just as a rose by any other name would smell as sweet, a sports bet relabelled as a \u201ccontract\u201d remains a sports bet.<\/p>\n
The state of Nevada may accordingly enforce its gambling laws against the platform.<\/p>\n
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CONTINUE READING BELOW<\/p>\n
With two appeal courts in direct conflict, the US Supreme Court will in all likelihood have to decide who regulates this multi-billion dollar industry, the federal government in Washington or the states.<\/p>\n
European perspective<\/p>\n
What is striking, from a European perspective, is that the Ninth Circuit \u2013 applying an entirely different law \u2013 arrived at the position that European Union law currently holds. The outcome of a match does not have a multitude of possibilities; it is a discrete fact that occurs one way or the other.<\/p>\n
So, a contract on the future level of interest rates may therefore qualify as a financial arrangement, whereas a contract on the identity of the winning candidate remains, in law, a wager.<\/p>\n
The fault line, on both sides of the Atlantic, does not run between financial and non-financial events; it runs between a range of possible outcomes and facts.<\/p>\n
Several member states in the EU, including Belgium, France, Italy, Poland and Romania, have blocked access to these platforms.<\/p>\n
Why should this concern the ordinary saver?<\/p>\n
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CONTINUE READING BELOW<\/p>\n
The classification embodies a choice between protection and access. The EU has determined that an all-or-nothing contract on a future event is incompatible with the protection of retail investors.<\/p>\n
That determination protects the saver \u2013 it also excludes them from an activity that is lawful \u2013 and for some, profitable. Neither solution is self-evidently correct \u2013 and the question is now before the European Commission.<\/p>\n
The European Securities and Markets Authority and the European Commission are currently looking at how the event contracts should be regulated, and whether they should be classed as gambling.<\/p>\n
The question of whether a wager on a conclave is an investment has remained open since 1591.<\/p>\n
An American federal court has just answered it in the same terms as Brussels initially; the US Supreme Court, and the European legislator, are next.<\/p>\n
Filippo Annunziata, Professor of Financial Markets and Banking Legislation, Department of Legal Studies, Bocconi University.\u00a0<\/p>\n
This article is republished from The Conversation under a Creative Commons licence. Read the original article.<\/p>\n
#bet #gambling<\/p>\n","protected":false},"excerpt":{"rendered":"
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