Better Markets Slams Prediction Markets as Gambling, Warns of Potential Insider Trading

Better Markets, an independent, nonpartisan, nonprofit organization promoting a healthy financial system, has become one of the latest critics of the growing prediction markets sector. The company echoed claims that the event contracts offered by such platforms constitute gambling and said that the industry has gone far beyond anything the CFTC intended it to do.

Better Markets Says Prediction Markets Are Gambling

In a publication dubbed “Prediction Markets,” Gambling, the CFTC & Regulation: Facts, Fiction & The Law, Better Markets commented on this rising format of trading, slamming its current lack of regulatory oversight.

For context, prediction markets are a form of trading where users can buy and sell shares in the outcome of a sporting, political, or cultural event (event contracts). Such platforms gained popularity partially thanks to the political trading craze surrounding the most recent US elections and have since made quick strides. Now a cultural phenomenon, prediction markets continue to grow to the dismay of tribal gaming operators, regulators, and traditional sportsbooks alike.

Better Markets was one of the latest organizations to slam the CFTC-regulated platforms as gambling, despite the fact that they use the “event contracts” designation instead.

The CFTC Should Focus on More Important Things Than Regulating Gaming

Better Markets explained that engaging with such products is not that different from gambling at a casino or sportsbook. However, unlike sportsbooks, which are restricted from offering certain bets, prediction markets allow users to bet on “everything from elections and sporting events to the Golden Globes and the return of Jesus Christ.”

Additionally, Better Markets rejected the notion that the peer-to-peer nature of prediction markets differentiates them from gambling. According to the organization, prediction markets’ fee-based model was not that different from the way in which casinos offer poker.

In its publication, Better Markets added that the CFTC, which regulates prediction markets, has virtually no experience in regulating gaming. The organization added that Americans depend on the CFTC to police the multi-trillion-dollar derivatives and commodities markets rather than to regulate gaming.

Better Markets warned that one of the biggest threats posed by prediction markets is the huge potential for insider trading.

Better Markets Says Prediction Markets Are Going Beyond What the CFTC Intended

Better Markets concluded that prediction markets are getting out of control, saying:

The bottom line: much of the gambling being done via event contracts is directly against the law and the intent of the statute, and all of it is far beyond anything the CFTC was designed or intended to do.

Better Markets statement

The company added that a democratic country should not allow private profit-maximizing financial firms to offer gaming nationwide without review from elected officials.