Prediction markets legality as gambling or derivative trading platforms, & rules

[Curious T]

I get it where you're coming from mate, but I dont think just because something is uncertain means it is related to gambling...having that kind of logic will sound like you're saying that stock trading would also be considered as gambling since no one knows the outcome. To me, predicting a market depends more on research and understanding different informations ... Some people may treat them like a gambling, but that doesn't mean its true. I really think that It depends on how someone uses it. If they're just placing their money around and hoping to get win and being lucky, then yeah, it's basically gambling. But if they're taking time to understand the situation before making a prediction and good judgement, then I wouldn't put it in the same category.

By this logic, if I analyse a sports game very well and place a bet, then I am not gambling? Even you don't think so. No matter the analysis, no matter how much I understand the sport, it is still gambling. If two people, let's say A and B, are running for office and I look at the data and analyze that B will win, then I place a bet on B to win; that is gambling. I have taken a gamble on B. For something to be a trading platform, you need to buy and sell when it appreciates to make profit (the simplified version of trading). You don't buy it and hope for an outcome, then sell. That is no longer trading. The stock market you mentioned, the forex market, crypto market, commodity market and every other market you can think of all need to buy something and then sell that thing when the price appreciates for a profit. If it doesn't appreciate, then they lose or sell at a loss. With a prediction market, you're not selling the asset when it appreciates, you just win when your prediction comes true. That sounds like gambling to me.

[SamReomo]

By this logic, if I analyse a sports game very well and place a bet, then I am not gambling? Even you don't think so. No matter the analysis, no matter how much I understand the sport, it is still gambling. If two people, let's say A and B, are running for office and I look at the data and analyze that B will win, then I place a bet on B to win; that is gambling. I have taken a gamble on B. For something to be a trading platform, you need to buy and sell when it appreciates to make profit (the simplified version of trading).

Yes, that falls into gambling not into trading, I've been trading for many years and I can say that such type of bets don't fall in trading but fall in domain of gambling. The prediction markets aren't platforms for traders by any means, they're a new type of platforms for gamblers.  Now because of the prediction market the gamblers can gamble on political events, on weather conditions and on many other things so they're basically a way for gamblers to gamble on multiple things. In trading one person buy an asset for cheap value and tries to sell it for high value to gain some profit that's how trading works.

Let's say if someone trades Bitcoin and that person buys Bitcoin for $60k and now that person needs to sell Bitcoin for more than $60k to make some profit, that person is a trader and such traders use exchanges like Binance or others to perform their trades. For each trade they'll pay some fees to platform, but in betting markets things work differently. A user has to place a bet on an event if the bet goes well the user earns money if the bet goes wrong the user lose the money so and that same thing happens in gambling, that's why those prediction markets resemble gambling platforms not trading platforms.

[Natalim]

,,..<>>that's why those prediction markets resemble gambling platforms not trading platforms.

Nice explanation, but why on paper they are called prediction markets? Why not just let the regulators classify them as gambling sites?

Im pretty sure regulators are not dumb. Kalshi for example is a prediction market and licensed in the US, so why would the US make the wrong classification if the activity is really gambling? Yes its close to gambling, but if regulators still call it prediction market then maybe theres a reason for that. Otherwise they should just classify it as gambling, not prediction.

[EarnOnVictor]

,,..<>>that's why those prediction markets resemble gambling platforms not trading platforms.

Nice explanation, but why on paper they are called prediction markets? Why not just let the regulators classify them as gambling sites?

Im pretty sure regulators are not dumb. Kalshi for example is a prediction market and licensed in the US, so why would the US make the wrong classification if the activity is really gambling? gambling, not prediction.

Arguments like this will never finish due to the imperfections of those we are voting into power; they are humans after all. Just see it this way: You and a friend are arguing, you favoured a point and the friend favoured another. What do you think the friend would do when he is opportune to be in position of power and have the right to decide on that exact thing? This is why stances and interpretations would always be different globally. Even gambling, you'll see difference classifications about it in different countries, and with individuals.

Specifically the context here, do you know the real problem? It's because prediction market is sitting between trading and gambling. There is no way conflicts between the two would not be happening, and hence, different countries with their different interpretations.

[Bryan jessy]

I get it where you're coming from mate, but I dont think just because something is uncertain means it is related to gambling...having that kind of logic will sound like you're saying that stock trading would also be considered as gambling since no one knows the outcome. To me, predicting a market depends more on research and understanding different informations ... Some people may treat them like a gambling, but that doesn't mean its true. I really think that It depends on how someone uses it. If they're just placing their money around and hoping to get win and being lucky, then yeah, it's basically gambling. But if they're taking time to understand the situation before making a prediction and good judgement, then I wouldn't put it in the same category.

By this logic, if I analyse a sports game very well and place a bet, then I am not gambling? Even you don't think so. No matter the analysis, no matter how much I understand the sport, it is still gambling. If two people, let's say A and B, are running for office and I look at the data and analyze that B will win, then I place a bet on B to win; that is gambling. I have taken a gamble on B. For something to be a trading platform, you need to buy and sell when it appreciates to make profit (the simplified version of trading). You don't buy it and hope for an outcome, then sell. That is no longer trading. The stock market you mentioned, the forex market, crypto market, commodity market and every other market you can think of all need to buy something and then sell that thing when the price appreciates for a profit. If it doesn't appreciate, then they lose or sell at a loss. With a prediction market, you're not selling the asset when it appreciates, you just win when your prediction comes true. That sounds like gambling to me.

Prediction or gambling are just two different words but they are mostly used to describe a particular action like the predictable market, where people predict and gambling same here, people still gamble on a particular thing or action to win something or make a profit in return so they are both serving the same purpose when it is being used in this exact context which is the common place they are being used, if a person predict something and it turns out the exact way, gambling can also be done on that same thing and if luck shines it turns out the exactly as guessed. So to me both words actually sounds the same in this context.

[Bluedrem]

Prediction or gambling are just two different words but they are mostly used to describe a particular action like the predictable market, where people predict and gambling same here, people still gamble on a particular thing or action to win something or make a profit in return so they are both serving the same purpose when it is being used in this exact context which is the common place they are being used, if a person predict something and it turns out the exact way, gambling can also be done on that same thing and if luck shines it turns out the exactly as guessed. So to me both words actually sounds the same in this context.

Yes, prediction markets and gambling are pretty much the same. Prediction markets are a part of gambling. When you are in the gambling business, you have to make predictions, like which team will win the sports you are betting on, you have to predict it. Or you have to guess which slot will win next time. On the other hand, when you make price predictions, you still have to make predictions based on assumptions. So it seems to be completely the same.

[Smartprofit]

Prediction or gambling are just two different words but they are mostly used to describe a particular action like the predictable market, where people predict and gambling same here, people still gamble on a particular thing or action to win something or make a profit in return so they are both serving the same purpose when it is being used in this exact context which is the common place they are being used, if a person predict something and it turns out the exact way, gambling can also be done on that same thing and if luck shines it turns out the exactly as guessed. So to me both words actually sounds the same in this context.

Yes, prediction markets and gambling are pretty much the same. Prediction markets are a part of gambling. When you are in the gambling business, you have to make predictions, like which team will win the sports you are betting on, you have to predict it. Or you have to guess which slot will win next time. On the other hand, when you make price predictions, you still have to make predictions based on assumptions. So it seems to be completely the same.

I don't consider betting on prediction platforms to be classic gambling. In my opinion, they're more like decentralized cryptocurrency exchanges. 🙋

The objects of trade are predictions (derivatives). Players don't bet against a bookmaker. They bet against each other. This is why insiders on Polymarket have enormous profit potential. At the same time, the prediction platform itself is a highly accurate analytical system for predicting the future and determining the true relationships between various things. This, by the way, angers many officials (who, incidentally, are very interested in making money on Polymarket because they themselves are insiders).

In short, prediction platforms are unique decentralized internet platforms of the second quarter of the 21st century. They are fundamentally different from traditional online casinos. I think they will be strictly regulated in the future, but for now, they represent an incredibly interesting social phenomenon!💁

[Fortify]

There have been more news that we have been reading about prediction markets like Polymarket and Kashi. News that are about their ban and legalities. It will be good if we discuss this on a single thread instead and which is the purpose of this topic.

Know that some of these countries like Indonesia and South Korea banned gambling. Prediction market operators see prediction markets as platforms where derivatives are traded, but some countries see them as gambling sites.

Any country that you know that I have not mentioned that banned prediction markets, you can post about it.

Any news we see about the legality of prediction markets as gambling sites or not, we can post about it on this thread.

I saw that New York state has recently decided to target Kalshi and claims that they are operating as an illegal gambling market. That potentially will have more impact because the regulators and fines dished out by US government (even state government) can often be quite ruinous to companies and could be so high to put them out of business. It may also lead to criminal charges and convictions against people that were working for the company as well, which may cause investors and talented staff to desert them. It will also act as a demonstration of what will happen should the Republican party, with it's currently awful approval ratings, fail to secure the midterms or next presidency - after all of Trumps cronies are purged it will be back to business and good government agencies will be cleaning these companies up.

[acroman08]

Well, I don't live in the United States and I don't have any professional knowledge on how this lawsuit could be carried out, but if the State of New York is suing them, then it would be considered a State lawsuit, not a federal lawsuit. So the president of the United States should not have so much influence on the outcome of this issue.

Some republican politicians will say this lawsuit is consequence of communism or the NYC major or something crazy like that.

And I agree with that, but with the influence Trump has right now, who knows what will happen. The guy loves putting pressure on government officials to influence their decisions, so who knows how this lawsuit against Klashi will go.

Also, that is an incredible amount of money, even for a company like Kalshi... It seems the government of New York is trying to get funding for their small state and NYC wherever they can get it from.

Maybe yeah, but NYC is the richest city in the world, so I am not really sure, but then again, we are talking about $36B here.

[Hispo]

Well, I don't live in the United States and I don't have any professional knowledge on how this lawsuit could be carried out, but if the State of New York is suing them, then it would be considered a State lawsuit, not a federal lawsuit. So the president of the United States should not have so much influence on the outcome of this issue.

Some republican politicians will say this lawsuit is consequence of communism or the NYC major or something crazy like that.

And I agree with that, but with the influence Trump has right now, who knows what will happen. The guy loves putting pressure on government officials to influence their decisions, so who knows how this lawsuit against Klashi will go.

Also, that is an incredible amount of money, even for a company like Kalshi... It seems the government of New York is trying to get funding for their small state and NYC wherever they can get it from.

Maybe yeah, but NYC is the richest city in the world, so I am not really sure, but then again, we are talking about $36B here.

The State of New York and the City of New York is famously democrat, Trump is not specially popular there because of it, much to his dismay.
Also, the City of New York is one of the richest cities on the world, that is true, but it is also one of the most expensive ones for its local government to run, due to the amount of people, the huge infrastructure and logistics which is needed in order to keep the City warm at winter, with clean running water and with electricity. So, no wonder they are trying to get some money from companies which alledgelly have broken their laws.

Let us see if the federal government steps in and tries to save Kalshi from all this situation.

[Ayers]

Personally I wouldn't accept prediction market as gambling and at the same time I will not see it as a legitimate trading, we should know that everything that has to do with prediction market goes along with the strong hands, it is mostly politically motivated and those that have inner clew about the state of affairs, I don't expect for any responsible Gambler to begin to consider for it than gambling.

Some countries view it as gambling, while some regulators view it as event derivatives or financial contract.

So the same platform may be legal in one country, but illegal in another.

Many here have mentioned that New York sued Kalshi for illegal gambling, even though Kalshi claims they are operating under the federal derivatives law.

Another point is, you mentioned strong hands, you meant insider information right? But the same applies to the stock market. Insider trading breaks the law, but that doesn't mean the entire stock market is gambling.

[Dogedegen]

Personally I wouldn't accept prediction market as gambling and at the same time I will not see it as a legitimate trading, we should know that everything that has to do with prediction market goes along with the strong hands, it is mostly politically motivated and those that have inner clew about the state of affairs, I don't expect for any responsible Gambler to begin to consider for it than gambling.

Some countries view it as gambling, while some regulators view it as event derivatives or financial contract.

So the same platform may be legal in one country, but illegal in another.

Many here have mentioned that New York sued Kalshi for illegal gambling, even though Kalshi claims they are operating under the federal derivatives law.

Another point is, you mentioned strong hands, you meant insider information right? But the same applies to the stock market. Insider trading breaks the law, but that doesn't mean the entire stock market is gambling.

I have seen this insider information argument many times but nobody has ever provided a good example why this would matter to them personally or a good argument. When people abuse insider information to gain an advantage in the prediction market it does not have an impact on you as a bettor unless you are doing something wrong entirely, like placing bets based on what others have bet. Then it may have some influence in your prediction, it could mislead you a bit or reduce your payout depending on the details of the bet. In all other cases it has no impact on you at all. If someone is willing to break the law to earn some extra money, others are not impacted by this at all.

I'll give an example to demonstrate that. Many people are already betting if the FED will raise the rates or not the next time. Let's imagine that I somehow got insider information that confirms that they will definitely do this, so I go on the prediction market and place a big bet on the yes side. I will win together with everyone who bet yes, and maybe I win the most because I risked a lot of money because I had insider information. The people who bet no would have lost anyway, so even without my bet because the rates would not be raised. That I had some insider information about it does not change the outcome of the invent, that would be a different kind of manipulation much more serious and damaging. Just basic insider information does not really harm good bettors, and those that want to go to jail let them do it. If they don't do it with prediction markets, they will probably do it anyway. Usually people commit crimes or they don't do it, most don't commit any serious crimes.

[purple_sparkles]

Personally I wouldn't accept prediction market as gambling and at the same time I will not see it as a legitimate trading, we should know that everything that has to do with prediction market goes along with the strong hands, it is mostly politically motivated and those that have inner clew about the state of affairs, I don't expect for any responsible Gambler to begin to consider for it than gambling.

Some countries view it as gambling, while some regulators view it as event derivatives or financial contract.

So the same platform may be legal in one country, but illegal in another.

Many here have mentioned that New York sued Kalshi for illegal gambling, even though Kalshi claims they are operating under the federal derivatives law.

Another point is, you mentioned strong hands, you meant insider information right? But the same applies to the stock market. Insider trading breaks the law, but that doesn't mean the entire stock market is gambling.

I have seen this insider information argument many times but nobody has ever provided a good example why this would matter to them personally or a good argument. When people abuse insider information to gain an advantage in the prediction market it does not have an impact on you as a bettor unless you are doing something wrong entirely, like placing bets based on what others have bet. Then it may have some influence in your prediction, it could mislead you a bit or reduce your payout depending on the details of the bet. In all other cases it has no impact on you at all. If someone is willing to break the law to earn some extra money, others are not impacted by this at all.

I'll give an example to demonstrate that. Many people are already betting if the FED will raise the rates or not the next time. Let's imagine that I somehow got insider information that confirms that they will definitely do this, so I go on the prediction market and place a big bet on the yes side. I will win together with everyone who bet yes, and maybe I win the most because I risked a lot of money because I had insider information. The people who bet no would have lost anyway, so even without my bet because the rates would not be raised. That I had some insider information about it does not change the outcome of the invent, that would be a different kind of manipulation much more serious and damaging. Just basic insider information does not really harm good bettors, and those that want to go to jail let them do it. If they don't do it with prediction markets, they will probably do it anyway. Usually people commit crimes or they don't do it, most don't commit any serious crimes.

Personally, I would love to have access to that kind of information so I could use it to my own advantage. And I'm pretty sure almost everyone would do the same if they had that opportunity.The real issue is when people abuse that kind of advantage. For example, when politicians or other highly influential individuals use privileged information, and as a result, people who don't have access to it, or who are easily manipulated, end up losing their money. That's a completely different situation, and I would consider it deliberate harm. I think it all depends on how much those actions affect other people. If no one would be harmed by having access to that information, I would gladly take advantage of such an opportunity if I had it.

[Dogedegen]

Personally, I would love to have access to that kind of information so I could use it to my own advantage. And I'm pretty sure almost everyone would do the same if they had that opportunity.The real issue is when people abuse that kind of advantage. For example, when politicians or other highly influential individuals use privileged information, and as a result, people who don't have access to it, or who are easily manipulated, end up losing their money. That's a completely different situation, and I would consider it deliberate harm. I think it all depends on how much those actions affect other people. If no one would be harmed by having access to that information, I would gladly take advantage of such an opportunity if I had it.

Your explanations are not correct, because it does not make sense. Information that could be abused is privilege information and it would be illegal, just good information that could be used to your advantage is not really an insider thing because it is not such a thing. Actually most of that information is already publicly available, it is just that most people don't want to spend the time that it requires analyzing it and interpreting what it means. They think that such information means someone just telling you to buy some kind of stock and then they get rich, that is not going to happen in cases that do not involve insider information.

Also you write that they are easily manipulated and end up losing money, but such descriptions are false. You need to describe the exact mechanism or way by which they lose money, because in most cases there is one. Don't just write whatever you think is happening, but describe the process. If a politician has privileged information because of which he buys a lot of one stock, it does not impact anyone else and nobody is going to lose money with this. There is no manipulation at all unless your decisions are only based on watching the chart movements, but then many kinds of trading and predictions could be seen as dangerous manipulations.

[viljy]

The objects of trade are predictions (derivatives). Players don't bet against a bookmaker. They bet against each other.

If you think about it generically, then in bookmaker offices, bettors also bet against each other, because in the end, the bookmaker receives and pays money from the players, only this does not happen directly, as in the prediction market, but the essence remains.

I would note a more significant (as it seems to me) difference between prediction markets and bookmakers. The bookmaker always distorts the odds. First of all, he takes into account his margin, and can also adjust the odds depending on the amount of bets. But in the prediction market, the odds are determined by "collective prediction", that is, the prediction market itself cannot, figuratively speaking, "move the line" in its own interests (like a bookmaker).

On the one hand, if a bookmaker makes a mistake, he can create an opportunity for a bettor (this is good, but rarely happens), and on the other hand, prediction markets are more accurate.

[Dogedegen]

The objects of trade are predictions (derivatives). Players don't bet against a bookmaker. They bet against each other.

If you think about it generically, then in bookmaker offices, bettors also bet against each other, because in the end, the bookmaker receives and pays money from the players, only this does not happen directly, as in the prediction market, but the essence remains.

That doesn't really make it much different when you consider it only from the view of payments, it is just that a decentralized prediction market removes the middle man but in a centralized one there is still the middle man and it works very closely to normal bookmakers from this view.

I would note a more significant (as it seems to me) difference between prediction markets and bookmakers. The bookmaker always distorts the odds. First of all, he takes into account his margin, and can also adjust the odds depending on the amount of bets. But in the prediction market, the odds are determined by "collective prediction", that is, the prediction market itself cannot, figuratively speaking, "move the line" in its own interests (like a bookmaker).

On the one hand, if a bookmaker makes a mistake, he can create an opportunity for a bettor (this is good, but rarely happens), and on the other hand, prediction markets are more accurate.

I think you simplified a bit too much here, it is true that you can find opportunities when a bookmaker makes a mistake but this comes at the expense of distorted odds and his margin. On the other hand the claim that prediction market accurates is not true. They are good at integrating information because many people who bet there are very informed about the bets, so they would be incorporating new information into the trades all the time and the odds would adjust. But with this kind of concept you ca have other issues, it is very similar how people act on hype and fear in bear and bull markets. The same kind of behavior by the collective as you call it or the herd can cause very distorted prices at least in the short term so with that it is very similar to the case when bookmakers make mistakes. The main difference from this view is that there are more people involved that leads to the wrong pricing, and I guess this is also one of the reasons why people don't understand fully the prediction markets. Sometimes I see the claim look that event has a 57% of happening because that is the current situation on Polymarket, but that is just outright false and the situation on prediction market never shows real world probabilities it is just the opinion of the collective of users that bets on that market. If you look at cases of mass hysteria and stuff like that, a big group of people can be very wrong.

[viljy]

I would note a more significant (as it seems to me) difference between prediction markets and bookmakers. The bookmaker always distorts the odds. First of all, he takes into account his margin, and can also adjust the odds depending on the amount of bets. But in the prediction market, the odds are determined by "collective prediction", that is, the prediction market itself cannot, figuratively speaking, "move the line" in its own interests (like a bookmaker).

On the one hand, if a bookmaker makes a mistake, he can create an opportunity for a bettor (this is good, but rarely happens), and on the other hand, prediction markets are more accurate.

I think you simplified a bit too much here, it is true that you can find opportunities when a bookmaker makes a mistake but this comes at the expense of distorted odds and his margin. On the other hand the claim that prediction market accurates is not true. They are good at integrating information because many people who bet there are very informed about the bets, so they would be incorporating new information into the trades all the time and the odds would adjust. But with this kind of concept you ca have other issues, it is very similar how people act on hype and fear in bear and bull markets. The same kind of behavior by the collective as you call it or the herd can cause very distorted prices at least in the short term so with that it is very similar to the case when bookmakers make mistakes. The main difference from this view is that there are more people involved that leads to the wrong pricing, and I guess this is also one of the reasons why people don't understand fully the prediction markets. Sometimes I see the claim look that event has a 57% of happening because that is the current situation on Polymarket, but that is just outright false and the situation on prediction market never shows real world probabilities it is just the opinion of the collective of users that bets on that market. If you look at cases of mass hysteria and stuff like that, a big group of people can be very wrong.

I think I'll agree with your comment. In this case, we can put it this way: prediction markets are closer to crowd predictions, compared to the odds from bookmakers. By the way, the "collective predictions" turn out to be quite accurate: https://polymarket.com/accuracy

[DubemIfedigbo001]

Of course they will coat it to be derivative trading platforms but we all know what is gambling when we see one and that is exactly what the prediction market is.

Just the same way SK and Indonesia had to ban gambling that will be the fate of prediction market and the list of many more bans will keep surfacing.

Prediction markets are rebranded gambling. casino games is gambling with already programmed product while prediction markets deals with gambling on live occurrences. The scenarios are different, but the mission is the same. Funny enough are countries which bans sports books but allowed predictions markets which still allows users buy contracts on outcomes in sports events.

If a country bans gambling and allows prediction markets, then they are deceiving themselves since it is still a similar platform which can still be used irresponsibly and clients will still get addicted to it.

[Maslate]

If a country bans gambling and allows prediction markets, then they are deceiving themselves since it is still a similar platform which can still be used irresponsibly and clients will still get addicted to it.

Im actually not very familiar with this.
Can you name some countries that completely ban gambling but still allow prediction markets?

Or countries that allowed prediction markets before, but later banned them after realizing they are similar to gambling?