全民对赌时代？预测市场的合法性风暴与联邦州权暗战

Natalie Kitroeff: From The New York Times, I'm Natalie Kitroeff. This is The Daily. Over the last year, America has witnessed the explosion of prediction markets, platforms like Kalshi and Polymarket, which allow you to wager on just about anything, from who will win a football game to the weather in New York City. But now, those hugely popular platforms are in the middle of a legal battle that could determine whether they get reined in or whether betting on everything becomes the norm everywhere. Today, my colleague David Yaffe-Bellany explains. It's Tuesday, September 29th. David, welcome back to the show. It's wonderful to have you.

David Yaffe-Bellany: Thanks for having me.

Natalie Kitroeff: So, the last time you were here, you walked us through the rise of these prediction markets. And since then, they've gotten even bigger and they've become a target of a growing number of legal challenges. So, can you just start by giving us a lay of the land here? Where do things stand?

David Yaffe-Bellany: Yeah, a lot has happened. These platforms have been exploding for months, but now they're exploding even more, if that's possible. There was about $38 billion last month on the biggest prediction market. That's already up to $42 billion in the month of September.

Natalie Kitroeff: Wow.

David Yaffe-Bellany: So, there's a real burst of consumer interest in these products. And they've sort of become ubiquitous.

Ad Voice: Hey, have you heard about this prediction market, Kalshi?

David Yaffe-Bellany: You can't turn on the TV and watch a sports game without getting bombarded with a prediction market ad.

Ad Voice: With Kalshi, you can trade on anything. From culture to the weather. Unlike sports books, Kalshi doesn't set the odds. Other users do.

David Yaffe-Bellany: There's a recent one with LeBron James.

Ad Voice / Character: It's live trading. You got to stay on your toes. "Morning, Eli." "What up, LeBron?"

David Yaffe-Bellany: There's another recent one with Sydney Sweeney.

Ad Voice: Trading on sports. Trade it balls.

Natalie Kitroeff: It just seems like all the top celebrities are getting kind of sucked into this world.

David Yaffe-Bellany: Right. And now that football season has started, it is truly inescapable for some of us.

Natalie Kitroeff: Absolutely. And football season is sports betting season, and that's surely going to lead to another burst in popularity and more money flowing into these platforms.

David Yaffe-Bellany: But at the same time that all of this interest has surged, there have also been a succession of scandals around prediction markets.

News Report: A US special forces soldier who helped to plan the January capture of Venezuelan President Nicolas Maduro has been indicted for allegedly using classified information about the raid to place bets in the prediction market.

David Yaffe-Bellany: And most of them have revolved around insider trading, which of course is the idea that you could take confidential information and use it to make money on these platforms.

News Report: Gabriel Perez is accused of making more than $90,000, nearly 100,000 bucks on Kalshi by betting on what the president would say during his speeches. Remember, this is the guy running the prompter.

David Yaffe-Bellany: For instance, there might be a prediction market question about, say, who's going to attend the State of the Union. And if you have confidential advance information about that, then you can bet based on it.

News Report: This morning, a sources say disgraced former Congressman George Santos is under investigation for possible insider trading on the prediction market Kalshi.

David Yaffe-Bellany: And in fact, exactly that scenario played out this year when George Santos placed a bet on his own attendance at the State of the Union.

Natalie Kitroeff: Oh my god.

News Report: By skipping the speech, sources say he pocketed tens of thousands of dollars. Kelsey froze his account and a

David Yaffe-Bellany: He got caught and ended up having to pay a big fine and it was the latest fun episode in the never-ending George Santos saga.

Natalie Kitroeff: Yikes.

David Yaffe-Bellany: So, as you can imagine, with all this going on, money flowing into these platforms, scandals erupting all the time, a lot of people in the legal world have been wondering, who's minding the shop? What should the rules look like? How should these platforms be regulated? And the most aggressive player in all that has been the states, and in particular the state attorneys general, who are the officials responsible for enforcing state laws.

Natalie Kitroeff: Hm.

David Yaffe-Bellany: Over the summer, 44 states signed a letter attacking prediction markets, calling them basically online casinos that prey on young people. And as of last month, about 20 states were involved in litigation against the prediction market companies.

Natalie Kitroeff: And what's that litigation actually about?

David Yaffe-Bellany: The fundamental question at the heart of all of these lawsuits is whether what's happening on a prediction market constitutes gambling and whether it should be regulated by state governments or by the federal government.

Natalie Kitroeff: Okay, I want to get into that question and understand it, but before we do, just say why it matters whether these platforms are regulated by the state governments or by the federal government.

David Yaffe-Bellany: It matters because ultimately it could determine whether people everywhere are allowed to use these platforms the way they are now, or whether the future of this industry is much more limited. That's really what's at stake here, whether this crazy moment that we're in where it almost feels like a free-for-all, like the wild west, whether that continues and even expands, or whether this industry gets reined in and has to follow an entirely new set of rules that might limit what's going on quite significantly.

Natalie Kitroeff: Okay, so just walk us through the legal arguments for the states regulating versus the federal government.

David Yaffe-Bellany: It's a pretty fascinating debate, and ultimately it comes down to kind of an existential question about these markets, which is are they similar to a casino where everyone's gambling, or are they more like the stock market where people are investing? They're placing trades, they're making informed decisions. And what the state says you just look at this stuff, it's obviously gambling. Look how it's marketed. Look at what people are doing on this platform. They're betting on the outcome of sports games. How is that not gambling?

Natalie Kitroeff: And states regulate sports sites, right? So, they're saying we get control over this.

David Yaffe-Bellany: Yes, since 2018 the Supreme Court gave the states the ability to regulate sports betting, and the states say that's what this is. But, the companies come back and say no, we're actually doing something fundamentally different that's much more like investing where people are actually making sophisticated financial decisions and using these platforms like they're vehicles for complicated investments.

Natalie Kitroeff: Okay, I think for a lot of people their gut reaction to that is just going to be wait, obviously these are betting apps, right? So, just break down exactly how this argument works, how this isn't actually gambling.

David Yaffe-Bellany: Prediction markets are structured differently than traditional sports books. So, in traditional sports books you've got the person placing the bets, and then you've got the house which sets the odds. And when the person who's betting loses, the house makes money. So, you're set up in this kind of like oppositional relationship between the company and the user.

Natalie Kitroeff: And that can create some predatory incentives in how sports books are run.

David Yaffe-Bellany: The markets are structured differently. They're structured more like a financial exchange where on each side of a bet, you've got a different user. So, I'm not vying against the house, I'm vying against somebody else who's also betting on the platform. So, if I bet $5 that the Eagles will win, someone else is betting $5 that the Bears will win. And so, it's a peer-to-peer interaction as opposed to one that's run by this kind of centralized house that benefits when you lose. And also, the markets take transaction fees. They're getting a cut of each of these bets. And so, they make the point, we will get our cut if you win or if you lose. You know, we don't have a stake in your success or failure.

Natalie Kitroeff: Okay, so the broad argument here that the prediction markets are making is, look, we just have a bunch of people reacting to each other and setting the price, setting the odds together.

David Yaffe-Bellany: Exactly. And that's how a traditional financial exchange is set up. That's how the stock market works. And so, that's what these companies are pointing to.

Natalie Kitroeff: Okay, I have to say that argument has some logic to it that they are kind of acting more like a financial market than like a bookie.

David Yaffe-Bellany: It does, absolutely. They're different from bookies. I mean, they're correct in saying that. But the point that the states come back and make is that it can still be gambling. And they point at things like marketing. Marketing in which companies have used words like bet that clearly seem to characterize what's happening as something akin to gambling. They point to a kind of looks like a duck, quacks like a duck type of test.

Natalie Kitroeff: Hm.

David Yaffe-Bellany: And I think the point there is the way that consumers interact with these platforms is no different than how they interact with sports books. But Kalshi and Polymarket say no, it's not just the structure that's different, it's also the way that people use these platforms, that people are using them to hedge real risks in their real life.

Natalie Kitroeff: Like, give me an example.

David Yaffe-Bellany: One that Kalshi has pointed to is an ice cream shop in California that placed bets on the weather. So, they would bet that it would rain on a certain weekend and they wouldn't have as much ice cream to sell because nobody's coming in to buy it, but they'd make money on Kalshi.

Natalie Kitroeff: Right. The idea is that this ice cream shop is going to Kalshi specifically basically to take out an insurance policy on the possibility that it rains.

David Yaffe-Bellany: Exactly. And Kalshi is really excited about examples like this because what it looks like is, "Wow, something that's different from betting." A use of this platform to protect against an unwelcome event in your life.

Natalie Kitroeff: All right, I could see why they would want to cite that, but how common is that actually, David?

David Yaffe-Bellany: I don't have any concrete numbers on exactly how many people are doing that, but the examples that Kalshi has pointed to have really felt like kind of handpicked talking points.

Natalie Kitroeff: All right. So, you started by saying that this all of this has become this massive legal fight. What have the rulings been so far? Where do things stand?

David Yaffe-Bellany: There's been a real mix of rulings across the country, but crucially we've seen what's known as a circuit split, which means that two federal appellate courts have come to opposite conclusions. One appellate court has ruled in favor of the prediction market companies, saying that these platforms should be regulated by the federal government.

Natalie Kitroeff: Okay.

David Yaffe-Bellany: But, another appellate court, the ninth circuit, has reached the opposite conclusion.

David Yaffe-Bellany: That actually the states do have a stake in regulating these platforms and should be allowed to do so. What that means is that a legal conflict has been set up in the federal court system. And typically, when there's that kind of split, it leads to a showdown at the Supreme Court.

Natalie Kitroeff: And do we know when this potential showdown at the Supreme Court will happen?

David Yaffe-Bellany: We don't know exactly, but it's likely to take months, maybe even years. But, in the meantime, there's sort of an X factor here that's really influencing how this litigation could play out. And that is President Trump and his family.

Natalie Kitroeff: We'll be right back. Okay, David. How does President Trump and his family factor into all of this, this battle over prediction markets?

David Yaffe-Bellany: So, Donald Trump Jr. has a pretty significant financial stake in the prediction market industry. And that's largely through both Kalshi and Polymarket. And he's not just an investor, you know, in a lot of ways he's really made himself the public face of this industry.

Natalie Kitroeff: Like what? What do you mean?

David Yaffe-Bellany: So, for instance, earlier this year, a group of Republican attorneys general got together for a big meeting in New Orleans. It was a private, closed-door meeting. Donald Trump Jr. spoke to this group.

Natalie Kitroeff: Hmm.

Natalie Kitroeff: And what did he say to these state AGs who, remember, are the crucial players in this legal fight?

David Yaffe-Bellany: Right. He made the case that prediction markets ought to be regulated by the federal government. And that was a sort of powerful and pretty pointed message from the president's son.

Natalie Kitroeff: I mean, it is pretty remarkable to have the son of the president going to attorneys general and directly telling them to lay off of platforms that he has a stake in.

David Yaffe-Bellany: Absolutely. Donald Trump Jr. technically isn't part of the administration, of course, but when somebody with that name gets up on stage and says that, it carries the weight of the administration with it. And it's also true that in all kinds of ways, the administration has acted in lockstep with the message that Donald Trump Jr. has been communicating about these prediction markets.

Natalie Kitroeff: Okay, explain that.

David Yaffe-Bellany: So, the administration's approach to prediction markets is centered around that agency that I mentioned before, the Commodity Futures Trading Commission, the CFTC. And the CFTC is kind of viewed in Washington as the boring, unsexy younger sibling to the SEC.

Natalie Kitroeff: Right. By the way, I don't know that anybody has ever described the SEC as sexy, so

David Yaffe-Bellany: Well, we're talking about financial regulation here. So, in relative terms, you know, I think the SEC qualifies.

Natalie Kitroeff: Right.

David Yaffe-Bellany: Historically, the CFTC has been in charge of overseeing markets for farm goods, like soybeans or wheat. And the types of financial contracts that are traded on prediction markets fall under the purview of the CFTC. Under Trump, the administration appointed this chair of the CFTC who is very friendly to crypto and prediction market companies. And under him, the agency has taken some really extraordinary steps to protect the prediction market companies.

Natalie Kitroeff: How? How so?

David Yaffe-Bellany: The CFTC has filed lawsuits against nine states that are trying to regulate prediction markets, arguing that they should back off, that they have nothing to do with these platforms, that these are federally regulated exchanges. And in one case in Nevada, where a judge issued an order telling Kalshi that it had to shut down its operations in the state and unwind active bets that people had placed on the platform, the CFTC actually told Kalshi, "Disobey that order, and we will protect you in court."

Natalie Kitroeff: Hm.

David Yaffe-Bellany: Again, a highly unusual situation. A federal agency saying to a company, "Disobey a court order."

Natalie Kitroeff: And doing so on the basis of a theoretical emergency? Like the argument here was no, don't unwind your trades, keep allowing people to bet on your platform?

David Yaffe-Bellany: Yeah, a crisis of trust in the prediction market landscape, basically. It's saying, "This is a market emergency. This is a market we regulate and now a state court is trying to interfere with that and that could cause a destabilizing impact, so you can't follow that order."

Natalie Kitroeff: Just to step back, David, and think about the other side here. Can you walk me through the motives of the states? Why do they want to regulate these companies?

David Yaffe-Bellany: It's a lot of factors. Even though sports betting has been on the rise in the United States for years at this point, it's not legal everywhere. There are states like California and Texas where sports betting is banned. I spoke with the attorney general of Utah where gambling is outlawed in the state constitution. And so some of these states just want nothing to do with betting of any kind. They want to get rid of it entirely.

Natalie Kitroeff: Yeah, okay.

David Yaffe-Bellany: There are other states where sports betting is allowed, but there are consumer protections built around it that the state spent a lot of time establishing. So, for example, sports betting is only legal if you're over the age of 21. Well, on Kalshi you can bet if you're over the age of 18 because that's the rule governing financial exchanges. So, there's an argument about what the rules around sports betting, even in places where it's legal, should look like.

Natalie Kitroeff: Got it.

David Yaffe-Bellany: And then, I would say the third crucial thing that the states are fixated on is tax revenue. In states where gambling is legal, the states collect, sometimes, billions of dollars in revenue as a result of that activity. And that's revenue that they're not getting from prediction market companies at the moment. And that's obviously a source of huge frustration for state leaders.

Natalie Kitroeff: Interesting. So, the states' ability to collect tax revenue from these platforms depends, it sounds like, on their ability to regulate them.

David Yaffe-Bellany: Typically, yes. When the states started regulating the gambling companies, they created these frameworks that entailed a tax, and that's been really valuable to the states. And those frameworks don't exist for prediction market companies, for the most part. And, as you can imagine, those sports betting companies that worked so hard to get regulated in the states, a lot of them are very unhappy about what the prediction markets are doing, and they think it's totally unfair that they're paying taxes, that they're having to comply with all these rules, while companies like Kalshi can kind of just march in and do what they want.

Natalie Kitroeff: So, they're on the side of the states here. They want the prediction markets regulated just like them.

David Yaffe-Bellany: Many of them are on the side of the states, though there have been some pretty high-profile examples of these companies saying, "If we can't beat 'em, join 'em." And there are big traditional sports books that are now launching their own prediction markets and kind of trying to take advantage of the opportunity that companies like Kalshi have identified.

Natalie Kitroeff: David, I just want to push on the idea that the states regulating prediction markets would actually rein them in more. I mean, the states currently regulate regular sports betting companies, and it honestly seems as though sports betting is absolutely out of control right now. Like, if this is what it looks like for states to regulate, it's not totally clear to me what Kalshi and Polymarket have to fear.

David Yaffe-Bellany: You're absolutely right, and one of the arguments that the prediction market companies make is wouldn't it be better to have a single unified clear federal regulatory regime instead of a patchwork of 50 state rules that might be confusing to people or contradict each other or just be imperfectly executed. And that's a legitimate argument, I think. But at the same time, it's clearly the case right now that the federal regulator that's overseeing prediction markets is heavily tilted toward the side of these companies. And that has caused people to say, you know, is this agency equipped to do this really difficult job? Maybe in a future administration it might be, but a lot of people have concerns about the current landscape.

Natalie Kitroeff: Right. I mean, this brings up this question for me that I've had throughout our conversation, which is is it always a given, actually, that federal regulation of an industry like this is less stringent? Or is that just because the Trump administration has installed, as you said, a deferential head of this agency that is now regulating them? If a future administration came in and changed things, would the federal government potentially be harsher than the states?

David Yaffe-Bellany: I think that's entirely possible. The one problem with that hypothetical is that in the history of the CFTC, it has never been an aggressive regulator on the level of something like the SEC. And the question that a lot of critics of this industry are asking is was this agency ever set up to do something like this? And I think that's a kind of legitimate debate that you could have even in a Democratic administration. The other issue at play here is one that's been at the center of American democracy from the very beginning. It's this question of do the states have certain powers? Does the federal government have certain powers? Who can do what? And how that debate is adjudicated in this particular case has huge practical implications because right now sports betting isn't legal in every state. In fact, two of the most populous states have outlawed it. And so what's really at stake here is whether people can actually engage in this activity everywhere the way they have been doing.

Natalie Kitroeff: Meaning how pervasive these prediction markets are and exactly how far their reach is across the country.

David Yaffe-Bellany: Right. It would be naive to think that the prediction markets were going to go away entirely, that we could just roll back time and suddenly they wouldn't exist anymore. But the outcome of this court battle will have a major impact on how widespread this industry ultimately becomes. You may think that these companies are already ubiquitous. You're seeing them everywhere. They couldn't possibly get bigger. But I promise you if these companies win this court battle, then the kind of betting mentality that they represent, the idea that everybody can bet on anything everywhere, will just get bigger and louder and more widespread and more ingrained in how our society functions. That could ultimately be where this is going.

Natalie Kitroeff: Well, David, thank you so much for being here.

David Yaffe-Bellany: Thanks for having me.

Natalie Kitroeff: We'll be right back. Here's what else you need to know today. On Monday, the Trump administration finalized its plan to significantly weaken fuel efficiency standards for passenger vehicles. Under the new rules, car makers are going to have 5 years to reach an average fuel efficiency of 34.9 miles per gallon for new cars and light trucks. That is far below the standard of 50.4 miles per gallon that was set under the Biden administration. President Trump cast the change as a way to lower car prices, but critics said that less efficient vehicles could cost consumers more at the pump in the long run. And British counter-terrorism officials said on Monday that the five men who had earlier been arrested near an air force base were being released on bail. It was an unexpected development after officials initially said that the men had been preparing to commit a terrorist act near the base, which is primarily used by American forces. Their release raised new questions about what exactly happened at the base, how the men managed to drive three vans so close to an area where American bombers are stationed, and whether the British army had failed to find any evidence after examining the vehicles for more than 24 hours.

Natalie Kitroeff: Today's episode was produced by Ricky Newvetsky, Diana Wynn, Jack D'Isidoro, and Adrian Hurst with help from Eric Ruke. It was edited by Chris Hackel with help from Paige Cowett and Devon Taylor. Contains music by Alicia Eatoop, Marion Lozano, and Diane Wong and was engineered by Alyssa Moxley. Our theme music is by Wonderly. That's it for The Daily. I'm Natalie Kitroeff. See you tomorrow. Mhm.