"Prediction markets, which sell contracts tied to the outcome of real-world developments, have exploded in popularity over the past year, attracting an increasingly mainstream fanbase eager to wager on everything from geopolitical conflicts to fashion choices to the Super Bowl. As they expanded, the platforms have become a magnet for ethical and legal controversies. On Thursday, for example, Israeli authorities announced that two people had been arrested on suspicion of using classified military information to place bets on Polymarket,"
"The letter from the senators reflects a growing divide over how Polymarket and competitors like Kalshi should be handled. The US government currently considers prediction markets to be derivative markets, which means they fall under the jurisdiction of the Commodity Futures Trading Commission. But state authorities, who have emerged as some of the industry's staunchest critics, are arguing the platforms should be subject to the same local regulations as gambling products."
A bipartisan group of 23 Democratic senators sent a letter urging the top federal regulator to avoid weighing in on pending court cases about prediction-market contract legality tied to sports, war, and other prohibited events. Prediction markets have rapidly expanded, drawing mainstream users and ethical and legal controversy, including arrests in Israel for allegedly using classified military information to place bets on Polymarket. Federal and state authorities clash over jurisdiction: the federal government treats prediction markets as derivatives under the CFTC, while state regulators argue they should face local gambling rules. Multiple federal lawsuits target Kalshi, and states have sued to block certain offerings.
Read at WIRED
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