A bettor opens a sportsbook and puts money on the New York Giants winning Sunday. Another person opens a prediction market and buys a contract that pays $1 if the Giants win. Economically, th
A bettor opens a sportsbook and puts money on the New York Giants winning Sunday.
Another person opens a prediction market and buys a contract that pays $1 if the Giants win.
Economically, those positions can look almost identical.
Legally, they can sit in completely different worlds.
Sportsbooks are generally regulated by state gambling authorities. Federally regulated prediction-market exchanges such as Kalshi argue that their event contracts are derivatives overseen by the Commodity Futures Trading Commission, or CFTC.
That distinction has become one of the biggest regulatory fights in U.S. finance.
In September 2026, New Jersey asked the U.S. Supreme Court to decide whether states can apply their gambling laws to sports contracts offered by federally regulated prediction markets. A federal appeals court had previously sided with Kalshi, while another court reached a different conclusion in Nevada.
The confusion begins with a simple fact: the products can resemble each other even though the machinery underneath them is very different.
Sportsbooks Set Odds; Prediction Markets Match TradersA sportsbook generally acts as the counterparty to its customers.
If a sportsbook offers Team A at -110, the operator has created odds that incorporate its expected margin. It may adjust those odds as money moves from one side to another.
A prediction market works more like an exchange.
Suppose a contract asking “Will Team A win?” trades at 63 cents.
One trader may be willing to buy “Yes” at $0.63. Another is effectively willing to take the opposite side. If Team A wins, the Yes contract settles at $1. If it loses, it settles at zero.
The 63-cent price therefore implies a market probability of roughly 63%, although real prices also reflect liquidity, fees and trader behavior.
Kalshi says it matches buyers and sellers rather than taking the opposite side of every trade. Its revenue comes primarily from transaction fees instead of the customer's loss being the operator's direct gain.
That exchange structure is why prediction markets are often compared with futures exchanges rather than casinos.
The Same Game Can Produce Two Different ProductsConsider a simple football example.
A sportsbook might offer:
Giants to win: -170
A prediction market might offer:
Giants win: Yes at $0.63
Both allow someone to profit if the Giants win.
But they express the trade differently.
FeaturePrediction marketSportsbookProductEvent contractWagerPricingMarket-clearing contract priceBookmaker oddsTypical counterpartyAnother traderSportsbookPayoutUsually fixed, such as $1Determined by oddsU.S. oversightPotentially CFTC/federalState gaming regulatorsPrice can move after entryYes, contract can often be resoldUsually no secondary tradingThe ability to trade out before settlement is an important difference.
If someone buys a Yes contract at 40 cents and new information pushes it to 70 cents, the trader may be able to sell before the event ends and realize a gain.
That looks much more like trading a financial contract than placing a conventional fixed sportsbook wager.
Market rules also specify exactly what source determines the outcome. Kalshi says each contract identifies its resolution criteria and official source before trading.
Why Regulators Still DisagreeThe legal question is much harder than the trading mechanics.
Kalshi is registered as a Designated Contract Market, placing it within the federal derivatives framework.
The CFTC argues that federal commodities law gives it authority over contracts traded on registered exchanges. In 2026, the regulator even sued New Mexico after the state attempted to apply gaming laws to Kalshi sports markets.
States see the issue differently.
Their argument is straightforward: if someone is putting money on whether an NFL team wins, calling it an “event contract” does not necessarily stop it from being sports betting.
That disagreement has produced lawsuits involving New Jersey, Nevada, Wisconsin, Kentucky and other states. Coinpaper's coverage of the state regulatory fight shows how quickly the dispute has expanded.
The CFTC itself is still working through the boundaries. It withdrew an older event-contract proposal in February 2026 and later opened a new rulemaking process focused specifically on prediction markets.
Coinpaper's guide to the emerging CFTC framework explains why the eventual rules could reshape both sports and political markets.
Why the Difference Matters to UsersThis is not simply a legal technicality.
Different classifications can affect:
Prediction-market surveillance is also becoming more important as the products expand. The CFTC has already pursued cases involving traders accused of using nonpublic information or influencing the event on which they traded.
At the same time, prediction markets are becoming a real financial business. Robinhood generated $156 million from event contracts in Q2 2026, more than the $129 million it earned from equity trading. Its users traded 13.6 billion event contracts during the quarter. Coinpaper's latest look at Robinhood's prediction business shows how quickly the category has moved into mainstream brokerage.
Prediction markets also serve purposes that sportsbooks rarely attempt. Contracts can cover inflation, interest rates, elections, economic data or regulatory decisions, giving traders a way to hedge or express views on real-world events. Our comparison of prediction markets and Wall Street forecasts shows why market prices can also function as live probability estimates.
