Some amount of what I do at this newsletter is ingest narratives about prediction markets, and I tell you how accurate I think those narratives are.
One of the arguments I keep seeing variations of amounts to this: If you ban prediction markets, a lot of that consumer activity goes offshore.
There’s no way to prove definitively if that’s true or not right now. I guess you could take polls and ask people what they would do in that event, but I am not sure that would be a great data point.
But I am willing to wager that far less than 100% of current federally regulated prediction market activity would go to offshore platforms.
Why do I think that? Well, this same message has been the refrain for the past decade in sports betting. Does legalizing sports betting channelize some activity away from offshore? Yes! On top of that, legalization creates rules about how it happens, and it also creates tax revenue. There are legitimate reasons for legalization.
But I think it’s pretty clear legalization has also created a lot of new betting activity, rather than simply shifting existing offshore activity onshore.
Let’s imagine a world where prediction markets (or at least sports event contracts) go away entirely somehow. There are several reasons why there wouldn’t be a full migration to offshore prediction markets. In no particular order:
There is more friction to betting and trading offshore in terms of payment options.
They aren’t/won’t be in app stores.
They can’t advertise as widely and through the same channels that legal options do.
For prediction markets, a lot of the options are crypto-based, which limits your audience right out of the gate.
We also saw Polymarket international exist for several years beginning in 2022 as a de facto offshore option, and was by far better-known than Kalshi in that time frame. Then we saw Kalshi scale as an entirely legal option, and volume exploded. It filled demand for a legal and more easily accessible product.
Here’s a comp for you. A lot of us in the US played online poker in the 2000s before PokerStars etc. went away because of the Department of Justice. Did all of those people go to offshore online poker options? Nope. Many just stopped playing, for some of the reasons above. Me included.
The other dynamic worth noting in the legal vs. offshore dynamic: The Commodity Futures Trading Commission has authority it can use to pursue offshore prediction markets that unlawfully serve US customers. See: Polymarket and the CFTC in 2022!
If offshore prediction markets are trying to serve the US, the CFTC is perhaps uniquely positioned to try to stop them. So even if you think that a lot of action will head offshore, the US is not powerless to attempt to stop said behavior.
Regardless, take the idea that prediction markets — either legal or illegal — are inevitable with a grain of salt.
The Event Horizon briefing
A quick look at what matters most in prediction markets.
📍 The Big Story
The CFTC’s intervention on mentions markets for sports broadcasts is sending some outsized ripples through the predictions pond. These novelty markets, which account for a fraction of a percent of total trading volume, have drawn widespread attention in the days since NPR first confirmed that they were under agency review.
On Tuesday, former CFTC commissioner Brian Quintenz made an appearance on CNBC’s Squawk on the Street for a five-minute conversation that concentrated entirely on mentions markets.
Here are the comments from Quintenz in full:
On the scope of the mentions markets review:
“I don't have a lot of information about what the CFTC is doing in particular, but I think it's important to dispel the notion, in general, that mention markets somehow don't have real-world economic utility, or that what certain people say publicly doesn't have real financial commercial or economic consequences, which is the basis of the law that allows for a derivative to be based upon that. That's exactly what the Commodity Exchange Act says, and that's what the CFTC implements when it oversees these exchanges.
“I think it's also important to acknowledge that this space has moved very quickly, and that while the agency didn't object to these contracts when they were originally listed, like they could have, it's very appropriate for the agency to have continued to think about markets like these, to evolve in how they think about them, to analyze them and possibly come back to the exchanges and say: you know, we're just not comfortable with how some of these things could be surveilled, or whether or not prosecutorial powers are sufficient to address some of our concerns. Those are dynamics and conversations that exist in derivatives markets every day and all the time.
“The last thing that I think is important to say is that, you know, we have heard and seen a number of people lob unsubstantiated and inappropriate accusations at the agency and say that it is somehow in the pocket of prediction markets. I mean, I think this action by the agency to review contracts in some aspects of these markets proves that that is not the case. This is an agency dedicated to the law, and they are working diligently to ensure that the obligations of the Act that they oversee are implemented appropriately.”
On the challenges of regulating markets that may be susceptible to manipulation:
“One of the benefits of the Commodity Exchange Act is that it is principles-based, so that it defines a number of principles that exchanges have to follow but doesn't necessarily prescribe the exact solutions that every exchange has to use in order to get there. And one of those principles is not listing contracts that are readily susceptible to manipulation. But there isn't a lot of published insight from the agency in terms of what that means. It’s up to every exchange to try to figure that out for themselves. And if the agency feels, and if the market feels, and if the exchange feels, like some of these mention markets are too susceptible to manipulation, then I think it's an appropriate conversation to have. And again, you know, the space is moving quickly. It's important to have that dialogue, and we want to make sure that these markets have integrity. So I welcome that conversation, and I applaud the action by the regulator to look at these.”
On whether integrity concerns might affect liquidity for some markets:
“It is the obligation of the exchange and the agency to ensure that market integrity exists across all products and these exchanges. But I don't think the standard has to be, or can be, that no, you know, illegal conduct could ever happen. That's the precautionary principle, and if that were applied across technology, we would live in the Stone Age. So, I mean, I think we have to be fair about, you know, how we're applying standards, because no other market does as much as Kalshi does in terms of trying to prevent these things from occurring in the first place, but that doesn't mean that they can't occur. The important part is, if they do occur, in the rare instances, they're prosecuted, And that's exactly what we saw in the case that you mentioned with the teleprompter.”
Some of what Quintenz frames as discretion or flexibility comes across, at least to me, as an agency that is sort of making it up as they go. Maybe the CFTC wasn’t fully prepared for the edge cases of its policy or the manipulation of markets or the sheer number of novel things it would be asked to regulate. Or maybe it really does believe that the CEA’s principles-based approach is a mandate for regulatory permissiveness.
Part of effective regulation, however, is being able to foresee impropriety and conflicts of public interest ahead of time—and to address the mechanisms that create them in advance. Part of being a good regulator is establishing the ground rules, not leaving it up to exchanges to “try to figure that out for themselves.” If the space is moving too quickly, it is the agency’s job to slow things down.
Anyhow, suggesting that a pause on this niche subcategory of markets proves once and for all that the CFTC is beyond reproach is objectively funny.
The Indian Gaming Association is also making mentions markets the subject of its weekly webcast The New Normal with Victor Rocha (Wednesday at 1pm Eastern).
🔭 What To Watch For
The White House is set to host an event on Wednesday with crypto industry stakeholders in something of a soft-launch event for the CFTC’s new Innovation Advisory Committee, which will hold its first official meeting on Thursday.
These proceedings became a bit less interesting for our purposes with reports emerging on Tuesday that prediction market companies would not be part of the event as originally anticipated.
An administration official clarified that the President would “host an event with tech leaders” in order to “strengthen America’s innovative and technological dominance.”
Politico has been leading the coverage of this gathering in Washington here and here.
🔥 Hot Market
Florida Republican Governor nominee
The outcome was never in doubt, but trades continued to pour in right up until the race was called on Tuesday evening. It was, in fact, the top-traded event of the day.
📝 New Event Contracts
New self-certifications listed with the Commodity Futures Trading Commission:
ForecastEx: Withdrew two hurricane-related contracts and certified a new Candidate Withdrawal Forecast contract
Kalshi: Certified three motor racing contracts and filed for two new perpetual futures—one tied to an index of the country’s 500 largest companies and the other a copper perp to add to its menu of industrial metals markets. Big story; more on this below in the roundup.
Rothera: Four sports contracts.
Novig: Soccer.
Gemini: A six-pack of markets around fantasy football performance.
💬 Quote Of The Day
“On one hand, I understand the libertarian argument: nobody wants a nanny state telling an 18-year-old he’s not allowed to blow his entire paycheck on sports betting. On the other hand, impoverishing an entire generation through deregulation seems like a bad strategy for a strong country.”
— Dave Nadig, president of ETF.com (more below from MarketWatch)
📊 Volume Tracking for Monday, Aug. 17
Kalshi volume: $994 million
Sports + parlays: 72.7% of volume
Crypto markets: 23.0% of volume
Trend line from Ticker Tracker:
Volume on other platforms:
Polymarket US: $101 million
Rothera: $11.9 million
Underdog: $11.3 million
ProphetX: $2.76 million
DKeX: $1.21 million
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News roundup
Everything else important that happened in or was written about prediction markets:
🚨 Important stuff
Kalshi seeks to launch ‘perps’ on equity indexes as it moves in on traditional exchanges’ turf (CNBC): “Prediction market platform Kalshi in a regulatory filing on Tuesday revealed it is seeking to launch perpetual futures tied to equity indexes.”
“The filing with the Commodity Futures Trading Commission is the latest move by the company to expand beyond just its prediction markets offerings, which started in late May when Kalshi first received approval for perpetual futures tied to cryptocurrencies.”
More from DeFi Rate: “Kalshi’s filing directly targets CME’s equity-index futures business. It repeatedly cites CME’s E-mini contracts as the traditional alternative and argues that perpetual futures address some of their shortcomings. Conventional equity-index futures expire on scheduled dates, requiring traders who want to maintain exposure to close or roll their position into a later contract. Kalshi says that process can introduce transaction costs, liquidity considerations and basis risk that a perpetual contract avoids.”
“The comparisons come as CME is challenging the CFTC’s decision to allow perpetual futures on regulated U.S. futures exchanges. In its June lawsuit, CME argued that Kalshi’s bitcoin perpetual does not qualify as a futures contract because it lacks a fixed expiration or delivery date.”
🔍 The lines continue to blur between these many forms of speculation. Kalshi wants perpetual futures on equity indexes, which is about as overtly financial as a product gets, while offering 12-leg baseball parlays on the same platform. Meanwhile a company that has been dealing in index futures since before the CFTC existed is arguing that Kalshi's perps aren't really futures at all. And a number of federal judges have now said that sports contracts are really wagers. Even the stakeholders can’t seem to agree on what any of these things actually are.
⚖️ Legal and regulatory news
California 2028: Tribes Will Ask Voters To ‘Trust Us’ — And They Will (InGame): “A legal sports betting initiative is coming to California in 2028. This is not news. Tribal leaders have promised another go-round at bringing online sports betting to the biggest state in the nation.”
“While I am not privy to the details of what an initiative might say, I’d posit that the most effective way to keep prediction markets out of California is to ban them — something that could be done via an online sports betting initiative. California Nations Indian Gaming Association Chair James Siva said earlier this summer that the tribes are looking for a ‘kill shot,’ which he defines as a complete, total, no-loophole prohibition on prediction markets. Anything less, he said, could give some level of credibility to the platforms.”
Alpaca registers with CFTC to enter prediction market sector (Yogonet): “Alpaca, an API-first brokerage technology provider based in New York, has taken a key regulatory step toward entering the prediction market sector after its subsidiary, Alpaca Derivatives LLC, registered with the Commodity Futures Trading Commission (CFTC) as a futures commission merchant (FCM) and became a member of the National Futures Association (NFA).”
“Alpaca's existing client roster includes brokerage firms, fintech companies, software developers, algorithmic trading platforms and quantitative funds. Brokerage firms and fintech companies have already shown adoption of prediction market products, a trend that could support Alpaca's entry into event contracts for its client base.”
📣 Industry news
Wall Street wants to turn sports betting into ETFs. Critics call it dangerous ‘nonsense.’ (MarketWatch): “If the prospectus is approved by the SEC, Volatility Shares will run separate ETFs for each NHL team. Each fund will track an index based on statistical measures of the team’s wins, losses, ties and other events during games, according to the filing.”
“Dave Nadig, the president of ETF.com, referred to the proposed NHL-team ETFs as ‘nonsense,’ but told MarketWatch that the proposal by Volatility Shares to the SEC was ‘completely unsurprising,’ in the current regulatory environment.”
“‘I think the mainstreaming and financialization of gambling may be one of the most significant developments in financial services in the last decade,’ Nadig said.”
Prediction markets entrant Novig posts more than $125 million in trading volume during its first week (CNBC): “The platform’s first week volume surpassed Kalshi and Polymarket U.S.‘s opening week volume for sports contracts, as well as those of Underdog and DraftKings’ proprietary prediction markets exchange, DKeX, according to data calculated from Novig.”
🔍 This number is factual but lacking context in light of Novig’s history as a state-licensed sportsbook that pivoted to a sweepstakes product prior to this rollout as a federally regulated exchange. The company said in June that it had an $8 billion run rate, which works out to about $150 million per week.
NFL Prediction Market Volume Reaches $167.8M in Week Ending August 16 (DeFi Rate): “NFL prediction market volume reached $167.8 million in the week ending August 16, up 324.4% from $39.5 million the week prior, according to DeFi Rate data.”
“Preseason game markets accounted for $143.5 million of that total, or 85.5%, across Kalshi, Polymarket Global and Polymarket US.”
Why Pro Sports Teams Are Holding Back on Prediction Market Deals (Covers): “New York’s MLB teams have become two of the few major U.S. sports teams to partner with prediction market operators. Most of their peers, however, are staying on the sidelines.”
“‘I think it’s fear of the fact that there’s uncertainty in how the market is going to be regulated, and for many of these owners and for many of these teams, they have business interests outside of their own state and internationally and worldwide,’ American University gaming professor Matthew Bakowicz recently told Covers.”
Cartesian Digital Launches Prediction Markets Service for Institutional Trading Firms (press release): Cartesian Digital, the leading outsourced accounting and investment operations firm serving the digital asset industry, today announced the launch of its Prediction Markets Service — a purpose-built offering that supports hedge funds, crypto funds, market makers, and proprietary trading groups with the accounting, investment operations, and reporting required to trade event-contract and perpetual-futures strategies at institutional scale.
📖 Everything else you should know/read
Prediction Market Surveillance: A View from the Trenches (Harvard Law School Forum on Corporate Governance): “It feels like prediction markets are everywhere these days. As prediction markets expand and trading volumes continue to rise, the industry’s long-term success depends on both established players and new entrants adopting rigorous market surveillance systems. And, over the course of the last year, it has become clear that although many principles from equity-market surveillance are applicable, prediction markets have several distinctive features that must be accounted for to ensure any surveillance system operates effectively.”
Aristotle Lawsuit Against Underdog Alleges It Was Manipulated Into Selling CFTC Licenses Below Fair Value (InGame): “In a 37-page complaint filed in Delaware Chancery Court on Tuesday, the company from which Underdog Sports procured two licenses to operate its own prediction market platform, Aristotle Exchange, is alleging that that Underdog and the company that acquired it ‘manipulated [Aristotle] into selling its CFTC-licensed subsidiaries for less than their fair market value,’ among other claims including breach of contract and fraud.”
Kalshi's $40B Valuation Is 'Staggering': Yesha Yadav (Bloomberg): “Yesha Yadav, professor of law and associate dean at Vanderbilt Law School joins Scarlet Fu and Dushyant Shahrawat on ‘Bloomberg Crypto.’ They discuss the growth of prediction markets, regulation, and Kalshi's $40 billion valuation.”
Can Prediction Markets Power Coinbase Global’s Next Phase of Growth? (Zacks): “For Coinbase Global, prediction markets are emerging as a new growth pillar, expanding the company’s addressable market and accelerating its transition into an ‘everything exchange.’ Coinbase entered the prediction-market space in November 2025 through a partnership with Kalshi, a regulated U.S. exchange that enables users to trade on outcomes of real-world events, including elections, inflation, sports and scientific developments.”
“Prediction markets also reinforce Coinbase’s ‘everything exchange’ flywheel. Through a single account, customers can hold cash and USDC, trade cryptocurrencies, equities and derivatives, and express views on real-world outcomes.”
Trading Technologies to Expand Prediction Markets and Crypto Derivatives Access with Support for OG.com and Crypto.com (press release): Trading Technologies International, Inc. (TT), a global capital markets technology provider, and Crypto com, global digital asset and financial services platform, today announced TT will support connectivity to OG.com, Crypto.com's CFTC-regulated exchange and clearinghouse, on the TT® platform.
Connectivity to Crypto.com's regulated prediction markets experience, OG.com, is scheduled to go live on TT in the fourth quarter of 2026. Additionally, TT will provide full support for Crypto.com's new margin-based crypto futures contracts at launch.
‘That was fun.’ As L.A. burned, online gamblers bet on how much the fires would destroy (Los Angeles Times): “As deadly firestorms raged in Los Angeles County, carving a path of destruction that displaced families and killed 31 people, bets online were rolling in.”
“The wagers flowed into Polymarket, a company that bills itself as the largest platform for predicting global events, where it posed frequently asked questions about the Eaton and Palisades fires as they scorched communities. How fast would the blazes grow? How long would it take to contain them? How much would be destroyed?”
Opinion: NC parents — there’s a bookie in your college freshman’s pocket (The Wake Weekly): “An 18-year-old freshman may not be old enough to place a legal sports bet in North Carolina. But this fall, they can nonetheless walk into their dorm room, pull out their phone and make the same wager anyway.”
“Prediction markets claim they cannot be regulated by states. Working with the Commodity Futures Trading Commission, they argue they are akin to the New York Stock Exchange — but for sports. That has opened up sports gambling to anyone as young as 18, including college students in North Carolina who are below the state’s legal sports-betting age.”
