1 hour ago
1
Prediction markets keep making inroads with crypto and AI operators, while the ‘states v feds’ legal fight over who oversees their operations keeps getting hotter.
- Crypto operators, AI models embracing prediction markets
- World Cup prediction volume outpacing licensed sportsbooks
- Tribal gaming, commercial casino operators align against prediction ops
- CFTC tells Kalshi to ignore Michigan geofencing order
- North Carolina (and prediction lobbyists) has the CFTC’s back on jurisdiction
On July 14, the Blockchain.com exchange announced that its users could now access Polymarket’s ‘event contracts’ directly via the Blockchain.com app, allowing users to bypass “the traditional friction of multi-platform onboarding, external wallet connections, and redundant deposit fees.”
Blockchain.com made no secret that this announcement was “timed precisely with the final, high-stakes football matches” of the FIFA World Cup. Prediction markets have seen their betting (sorry, trading) volume soar during the quadrennial football confab, but more on that a little further down.
Blockchain.com CEO/founder Peter Smith said teaming with Polymarket “allows us to instantly expand our feature set into the fastest-growing sector of crypto at the exact moment global interest is hitting its peak.”
Polymarket CEO/founder Shayne Coplan said his company “exists to help people better understand what is happening in the world and what comes next,” leaving out the crucial part where smarter/luckier users get PAID, baby.
Blockchain.com claims 43 million users in over 70 jurisdictions, although access to its new event contracts will depend on local laws. Bloomberg reported that the new option will be available in the European Union, but not in the U.S., in part due to the ongoing issue of whether this sports-betting-in-all-but-name is welcome in states that object to companies violating their local gambling rules (more on this below).
It’s not just crypto firms embracing prediction markets during the World Cup. On July 13, the New York Times reported that leading artificial intelligence firm OpenAI had struck a deal with Polymarket rival Kalshi to embed its World Cup data (aka a particular team’s chance of winning a specific match) into its ChatGPT search results.
The deal is a first for OpenAI, but neither it nor Kalshi opted to publicly celebrate the tie-up. The Times reported that OpenAI updated its corporate help web page to specify that users “cannot place bets through ChatGPT” while stressing that the Kalshi data is “for informational purposes only.” OpenAI also indicated that the deal was (for the moment, at least) limited to “queries related to the 2026 World Cup.”
OpenAI is by no means the first non-betting company integrating prediction market data into its products. Google (NASDAQ: GOOGL) began incorporating data from both Kalshi and Polymarket into its Gemini AI model last November. Kalshi has struck data deals with media outlets CNN and CNBC, while Polymarket has similar tie-ups with the Wall Street Journal and other Dow Jones properties.
The Coinbase (NASDAQ: COIN) exchange has a deal with Kalshi to offer prediction market wagers via Coinbase Financial Markets, a registered futures commission merchant with the Commodity Futures Trading Commission (CFTC). But Coinbase’s excessive shilling of its prediction product is beginning to grate on customers uninterested in gambling.
On July 9, a Coinbase user tweeted a complaint at CEO Brian Armstrong that he’d “literally deleted the app” due to his inability to turn off notifications pushing prediction market bets. Armstrong replied that it was easy to turn off notifications via the app settings, only to be told that the notifications “don’t stop no matter what setting I adjust.” (In March, Armstrong responded to similar complaints by claiming this was “a bug” that was “getting fixed now.”)
Another user echoed these complaints, tweeting that he was still receiving “full screen pop up ads for sports betting,” adding that he didn’t like “the ferocity with which this is being pushed on people.” Bankless podcaster David Hoffman twisted the knife further, tweeting “Bro… this is not the future of finance.” (It is, however, one of the few bright spots on Coinbase’s earnings reports now that retail crypto traders have gone AWOL.)
Prediction markets beating betting operators on World Cup wagers
The importance of the World Cup to Polymarket’s bottom line is evident in stats from the Blockchain.com release claiming that the company has seen football volume of $5 billion over the past 365 days, with $4.2 billion of that occurring since the 2026 FIFA tourney kicked off a month ago.
On July 4, CNBC reported that Kalshi—which relies more heavily on sports ‘contracts’ than Polymarket—had done $31 billion in notional volume in June, significantly greater than May’s $18 billion. Kalshi, which derives ~85% of its volume from sports events, has enjoyed daily volume over $1 billion since the first World Cup match on June 11.
Polymarket’s international platform reported volume of $10.8 billion in June, reversing the platform’s negative volume trajectory over the previous two months. Stateside, Polymarket U.S. saw its June volume top $3.5 billion, double May’s figures.
June represented the first full month of activity for Rothera, the prediction market joint venture of Robinhood (NASDAQ: HOOD) and Susquehanna International Group. Rothera reported $2 billion in volume for the month, roughly 7% of the U.S. total.
The combined stats are a multiple of the betting handle that U.S.-licensed sportsbooks have projected they will enjoy during the World Cup. Sportsbooks reportedly suffered significant dropoffs in daily active users once the tournament kicked off, with DraftKings (NASDAQ: DKNG) falling 36% and FanDuel down 41% between June 15 and June 30. Over the same period, Kalshi’s active users rose 36%.
Part of the reason for these diverging trends is the fact that you have to be at least 21 years old to wager in most U.S. states, whereas prediction markets only require users to be 18 or older. Prediction markets also serve all 50 states, including the ones that don’t allow online sports betting.
These lowered (or ignored) barriers are among the chief complaints by state attorneys-general re prediction markets offering betting products to local residents. But the shift from sportsbooks to prediction markets isn’t just hurting commercial gaming operators and state revenue coffers.
Tribal gaming, commercial casino operators align against prediction markets
On July 12, Tribal Business News posted an interview with James Siva, chairman of the California Nations Indian Gaming Association (CNIGA). Siva called the spread of prediction markets “the largest and most impending threat we have to tribal gaming and to tribal government and tribal sovereignty … It may be the biggest threat we’ve seen since the beginning of this industry.”
Siva said the group’s preliminary studies indicated that prediction markets have led to a 5% reduction in gross gaming revenue for the state’s tribal casinos. To put that into perspective, extrapolated across all U.S. tribal gaming operators, “a 10% decline would be the equivalent of the Bureau of Indian Affairs being defunded completely.”
But Siva said tribal gaming operators are even more concerned if prediction markets continue to expand their offering into products that resemble casino games. “If they are able to move into what essentially is full casino‑style gaming in these prediction markets, the decrease could be as big as 25% … just a huge loss for Indian Country.”
The tribes’ concern is shared by commercial casino operators. On July 9, Nevada Gaming Control Board (NGCB) chair Mike Dreitzer gave a keynote address at the National Council of Legislators from Gaming States summer meeting, at which he claimed to have seen ‘an online slot product powered by prediction contracts, not standard random number generators.’
While prediction market operators have denied any intentions to branch out into casino-style gaming products, Dreitzer claimed the operators “are very great at ingenuity. If there’s a proper loophole, they’re going to find it.”
Dreitzer insisted the NGCB wasn’t against prediction markets as a concept, only the fact that operators refuse to recognize state gambling rules. CNIGA’s Siva offered a similar view, saying tribes weren’t “advocating for special treatment of special privileges,” simply for “current existing law to be followed.”
Dreitzer noted the “very interesting coalition” that has risen to defend their law-abiding activities from the prediction interlopers. “Gaming states, non-gaming states and tribes altogether have galvanized around this issue.”
Siva concurred, noting that tribes and commercial operators joined forces to press Congress to include sports betting prohibitions in the digital asset market structure bill (CLARITY Act) currently mired in the Senate. But ultimately, Siva believes “the path is leading to the Supreme Court.” And he’s not alone.
CFTC inserts itself into another state legal fight
Prediction market operators have felt comfortable making these bold incursions into traditional state regulatory territory due to the strident position adopted by Michael Selig, chairman of the CFTC. Selig has repeatedly claimed that what these platforms offer isn’t gambling but a type of derivative. As such, Selig asserts that prediction markets fall under the CFTC’s exclusive jurisdiction.
Under Selig’s brief tenure, the CFTC has sued nine U.S. states for daring to challenge prediction markets’ right to operate within their respective borders. Despite criticism that this isn’t a wise use of taxpayer funds, Selig shows no sign of backing down (in part because he has President Trump’s backing on this issue).
On July 14, Selig appeared at an Axios Live event in Washington, where he reiterated his stance that the CFTC “will defend our jurisdiction all the way up to the Supreme Court.” Selig claimed this fight is “existential” for the CFTC because states are “trying to nullify federal law. We can’t allow it for any type of derivative instrument.”
Later that same day, the CFTC added (sorta) Michigan to its list of legal interventions by issuing an order for Kalshi to “stay an emergency rule change” that the platform had proposed. On June 29, after failing to swallow Kalshi’s ‘it’s totally not betting’ arguments, a Michigan state court issued a temporary restraining order requiring Kalshi to geofence customers inside Michigan borders.
While it works out the technical aspects of geofencing, Kalshi sought to cancel pending bets placed by Michigan residents. But on Tuesday, the CFTC ordered the platform “to fulfill the open trades in accordance with its normal practices.”
The CFTC said the Commodity Exchange Act (CEA) requires the CFTC to ensure that market participants “have impartial access to CFTC-regulated markets and registered entities must adopt transparent access criteria that are applied in a non-discriminatory manner.”
Selig was quoted saying U.S. states “cannot force a [designated contract market] to violate its obligations, and federal law does not permit a DCM to discriminate against a state’s residents. Canceling trades that have already been executed is an unprecedented step that risks a cascading effect on the entire marketplace and undermines the certainty in contracting that is a necessary component of a functioning market. The Commission will not allow states or state courts to bully registered entities into violating the [CEA] and CFTC regulations.”
Selig appears to be forcing Kalshi into defying the Michigan court order, presumably to open a new front on the ongoing state v federal tussle over prediction markets. Of course, the odds of collusion between company and regulator aren’t zero, and the odds of the CFTC actually imposing any significant penalty on Kalshi for failing to give Michigan the middle finger are even lower. But it’s a curious move, to say the least.
Selig’s bombastic tone reflects that of the man who appointed him to the position, but some of his comments regarding how gambling is regulated have led to some gaming industry op-eds suggesting he “either doesn’t understand how sportsbooks and casinos work, or he’s distorting the truth. Either way, it’s not a great look for the chair of a federal regulatory body.”
Meanwhile, the House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development has scheduled a July 21 hearing titled Examining Customer Protections and Market Integrity in Sports Event Prediction Markets. Witnesses have yet to be revealed, but gaming industry reps are expected to attend, so expect fireworks.
North Carolina has the CFTC’s back
The CFTC’s claim of exclusive jurisdiction over prediction markets got a boost last week in North Carolina, where Gov. Josh Stein approved the state’s budget and its provision to tax CFTC-registered prediction markets at 6% of net trading fee revenue derived from state residents, effective January 1, 2027.
That’s a far better deal than state-licensed sportsbooks got, as the budget raised their gross wagering revenue tax rate from 18% to 23%. It’s also a significantly better deal than the 14.25% tax that Kentucky imposed on prediction market fee revenue in April (the same rate paid by the state’s licensed online sportsbooks).
The CFTC was so outraged by Kentucky’s tax rate that it earned a reference in the CFTC’s complaint against the illegal gambling charges Kentucky filed against prediction markets last month. The CFTC claimed the tax rate “essentially makes it impossible for prediction markets to operate in Kentucky.”
But North Carolina’s budget goes one better by declaring that the CEA grants the CFTC “exclusive federal regulatory authority” over prediction markets. While there are theories, it’s unclear why the budget chose to make this observation. You know, apart from the fact that the state currently imposes no actual rules that prediction market platforms need to follow, and thus somebody needs to keep an eye on what they’re doing at least, for appearance’s sake.
Watch: Bitcoin Scaling to 1M TPS? Teranode Explained (AWS + Enterprise Blockchain)
English (US) · 