A bookmaker and a prediction market can offer the same prediction — for example, which team will win. But from a regulatory perspective, they are two different products.
📌A bookmaker operates under the rules of a specific state. Entering a new market may require a separate license, a local partnership, product certification, as well as compliance with advertising, geolocation, KYC, and responsible gambling requirements. The operator also pays the state-mandated tax on gambling revenue.
📌Prediction markets use a different structure: a user purchases a financial contract on the outcome of an event. If the contract is traded on a registered exchange, its regulation falls under the CFTC. Instead of separate gambling licenses, a federal regulatory framework applies.
This is where the main legal dispute arises: if a user predicts the winner of a match, is it a sports bet or a financial derivative?
One of the main participants in the dispute is Kalshi, a CFTC-registered exchange for event contracts. The company considers sports contracts to be financial derivatives, while state gaming regulators view them as unlicensed sports betting.
✔️ In March 2025, New Jersey authorities ordered Kalshi to stop offering sports contracts to state residents. Kalshi went to federal court and obtained an injunction blocking enforcement of the order. In September 2026, New Jersey appealed to the US Supreme Court over the division of regulatory authority.
This also matters for traffic operations: a change in the legal status of prediction markets could affect advertising, registration, and affiliate program terms.
👉 Why has the dispute between federal and state regulators emerged around prediction markets? Read the full analysis here.
Can prediction markets compete with bookmakers on equal terms? 👇