How Polymarket Differs from Traditional Gambling Platforms: Key Legal Insights
Polymarket, a popular online prediction market, recently came under fire from regulators in Singapore and Thailand, with both countries moving to ban the platform, arguing that it operates as a form of gambling. This regulatory crackdown highlights the growing tension between Web3-based prediction markets and traditional gambling laws.
Are Prediction Markets the Same as Gambling?
At first glance, Polymarket’s inclusion of sports prediction markets may seem to position it as a direct competitor to licensed sportsbooks. Critics argue that, like gambling, users are betting on outcomes such as the results of sports matches. However, Aaron Brogan, a crypto attorney based in New York, counters this argument. He explains that, unlike state-licensed gambling products, prediction markets like Polymarket do not take sides in bets. Instead, they act as neutral intermediaries that match trades between users, earning money through transaction fees rather than the odds of the bets themselves.
How Prediction Markets Differ from Gambling
Brogan points out that prediction markets are designed to be tools for understanding, hedging, and creating public goods. Unlike casinos, which often ban skilled gamblers to preserve their mathematical edge, prediction markets embrace high-performing users, as their success does not harm the platform. “Prediction markets aren’t gambling because they aren’t structured to be,” Brogan asserts, highlighting that they operate with a fundamentally different set of incentives.
Regulatory Distinctions and Legal Frameworks
The legal landscape is another crucial difference. In the U.S., prediction markets registered as Designated Contract Markets (DCMs) are regulated under federal law via the Commodity Exchange Act. This preempts state-level gambling laws, protecting registered platforms like Kalshi from state regulation. However, platforms like Polymarket, which are not federally registered, could face legal challenges at the state level for facilitating activities like sports betting, which remains illegal in some regions.
The Growing Threat to Traditional Sportsbooks
Despite these regulatory hurdles, Brogan notes that new entrants like Crypto.com, which recently filed for self-certification as a DCM with the Commodity Futures Trading Commission (CFTC), are positioning themselves to challenge traditional sportsbooks. With the sports betting industry worth $21 billion, Brogan suggests that if prediction markets continue to proliferate, they could overtake traditional platforms in the future.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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