On the home page of prediction markets like Kalshi and Polymarket, people can put money on things like future tariff rates, weather and sports outcomes. Utah leaders say that sounds an awful lot like gambling and want to regulate the industry. So what actually makes a prediction market different from gambling? As it turns out, not a whole lot.
“What sets prediction markets apart is simply the way the federal government has chosen to regulate them,” said University of Utah economics professor Scott Schaefer.
Prediction markets are regulated by the federal government’s Commodity Futures Trading Commission. Kalshi is arguing that’s who they should be answering to when someone wants to place a bet on whether the price of corn goes up or down next week or what team will win the World Series.
But betting on a sports game is widely considered gambling and currently falls under the regulations of individual states. Gambling or any other “game of chance” is illegal in Utah under the state constitution.
Schaefer said prediction markets do blur those lines.
“Over time, it’s dawned on more people that a sports betting transaction and a side bet on the weather are actually very similar economic transactions,” he said. “And so then the issue is, well, then, who should have jurisdiction over those transactions?”
Even for things that do not fall under the traditional categories of gambling — like the future price of cattle or how much it’s going to rain this summer — Schaefer said well-established mechanisms like futures contracts function in much the same way as a bet on a prediction market. Futures contracts are agreements to lock in prices for a future date, which can help stabilize markets. Imagine buying wheat from a farmer now for delivery at harvest time when the price may have gone up or down.
“In some sense, we're making side bets on the weather, and there's good reasons we would want to let farmers do that,” he said. “It ensures their risk. It allows that risk to be diversified in the economy. That's a good thing to do.”
The argument now, he said, is whether there are good economic reasons for people to be betting on other things.
“Thinking about sports, it’s just another future event that we don't know what's going to happen,” he said. “I think the knot that we're tying ourselves in as a country right now is, ‘OK. Well, where's the line between what's an OK risk that we would allow people to hedge and what's not?”
Utah lawmakers made their opinion clear in the 2026 Legislative Session when they passed HB243, which classified proposition bets on predictive markets as gambling.
Sponsor Rep. Joseph Elison called using those markets “addictive behavior.”
“It's as addictive as drugs, alcohol, pornography, etc.,” he said. “It triggers the same part of a person's brain, and it can devastate, financially devastate people if it gets out of control.”
Kalshi was quick to respond and filed a lawsuit against the state in February even before it became law, alleging Utah’s efforts were “an intrusion into the federal government’s exclusive authority” to regulate predictive markets via the Commodity Futures Trading Commission.
Gov. Spencer Cox, for his part, vowed to challenge the commission’s purview over prediction markets in a Feb. 17 social media post, where he mused that he doesn’t remember the commission “having authority over the ‘derivative market’ of LeBron James rebounds.”
Kalshi was recently dealt a loss in court in Arizona on April 8, when a federal judge denied its request to stop a criminal case from moving forward that alleges the site runs an illegal betting platform in the state.
Even with efforts from Utah and Arizona to regulate the industry, Elison foresees a murky future for prediction markets.
“I think you're going to see a lot of mixed messages between State Supreme Courts,” he said. “If the federal side of things cannot come down with a proper definition, it's going to be a mess.”
Elison said he supports some form of federal regulation to avoid a patchwork of state laws. That just might happen if Utah Sen. John Curtis gets his way.
Curtis announced in March that he is co-sponsoring two bipartisan pieces of legislation: one to ban prediction markets from containing anything that resembles a sports bet or casino game and another looking to ban insider trading in those markets.
The latter is inspired in part by a series of suspiciously timed bets around the U.S. war with Iran, which netted some users hundreds of thousands of dollars.
“Public service should not be a pathway to private gain,” Curtis said when announcing the bill. “Our bipartisan legislation ensures that insider trading rules apply to prediction markets and removes any ambiguity in how those rules are enforced — underscoring a basic expectation that those entrusted with sensitive information cannot use it for personal profit.”
For economist Schaefer, he “doubts very much” that the lawmakers who created the Commodity Futures Trading Commission in 1974 intended to legalize sports gambling nationwide or create a framework for legal insider trading.
“Senator Curtis is trying to sort this out in Congress, and that's exactly what should be done,” he said.
