States vs. Prediction Markets: The New Battleground for Sports Gambling
the staff of the Ridgewood blog
Trenton NJ, On the Eve of the World Cup ,the line between “investing” and “betting” is blurring, and New Jersey Attorney General Jennifer Davenport is drawing a line in the sand.
Leading a powerful bipartisan coalition of 41 Attorneys General, Davenport is taking a stand against a new wave of platforms like Polymarket and Kalshi. These “prediction markets” allow users to trade contracts on future events—but state leaders argue they are nothing more than unregulated sportsbooks operating in the shadows of federal law.
The “Illusory” Distinction: Betting or Trading?
At the heart of the debate is how these platforms function. While they market themselves as financial tools for “event trading,” the reality looks much different to regulators.
On these platforms, users can wager on:
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Game Winners
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Point Spreads
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Player Statistics
According to the coalition’s formal comment to the Commodity Futures Trading Commission (CFTC), the difference between a traditional sportsbook bet and a prediction-market contract is “illusory.” For most users, these platforms provide the same thrill—and the same risks—as a standard parlay, but without the strict consumer protections required of licensed operators like DraftKings or FanDuel.
Why States Are Fighting for Control
Attorney General Davenport’s message is clear: Gaming regulation is a state power. By bypassing state laws, prediction markets avoid two critical responsibilities:
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Consumer Protections: Traditional sportsbooks are required to offer tools to fight gambling addiction. Unregulated markets often lack the oversight needed to protect “pathological gamblers.”
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Taxation and Revenue: Licensed gambling operations contribute significant tax revenue to state budgets. Prediction markets currently bypass these requirements, depriving states of funds used for public services.
“Prediction markets have no right to offer sports gambling in New Jersey in violation of the bedrock rules that other wagering operations follow,” says Attorney General Davenport. “States have the expertise, experience, and tools to regulate sports betting as they have for more than a century.”
The Risk of a “Federal Power Grab”
The 41 Attorneys General are urging the CFTC to recognize that it lacks the jurisdiction to oversee sports-related contracts. They argue that these contracts are used for entertainment-based gambling rather than legitimate financial risk management.
By pushing for federal rulemaking, the states hope to prevent what they call a “federal power grab,” ensuring that local authorities—who are closest to the public health impacts of gambling—retain the right to regulate or prohibit these activities.
A Bipartisan Front
The sheer scale of the coalition highlights the urgency of the issue. States ranging from California and New York to Alabama and Oklahoma have joined forces. This bipartisan unity underscores a shared concern that unregulated digital markets could lead to an increase in insider trading and financial instability for American residents.
What’s Next?
The CFTC is currently reviewing public comments on its proposed rules for prediction markets. The outcome of this decision will determine whether platforms like Kalshi and Polymarket will be forced to play by the same rules as the rest of the gambling industry—or if they will continue to operate in a legal gray area.
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It’s all about the Benjamins.
The never ending thirst for money.
All of the supposed complaints will disappear after NJ government gets a piece of the action.