Crypto lawyer Aaron Brogan argues that prediction markets like Polymarket are not gambling platforms, but rather neutral intermediaries that match trades without taking a side.
Prediction Markets Don’t Have a Gambling Problem
While regulators around the world ban Polymarket for being a gambling platform, attorney Aaron Brogan has a good argument for why it’s not.
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Some jurisdictions consider prediction markets gambling, but Aaron Brogan, a New York-based crypto attorney, makes the case for them being something else entirely. Singapore, Thailand, and Taiwan have banned Polymarket in their respective jurisdictions, citing reasons involving gambling.
The Surface-Level Argument
On the surface, it seems logical to ban Polymarket as just another gambling platform. Its inclusion of sports prediction markets makes it seem like a competitor to licensed sportsbooks around the world. Even prediction market’s harshest critics acknowledge that there’s some kind of value in an investment mechanism to hedge against events like an election or war.
The Underlying Difference
But beneath the surface, the argument that prediction markets are simply a Web3 version of gambling falls short, argues Brogan. “If you are a state-licensed gambling product, then you are taking one side of the bet. You’re essentially betting against your users,” Brogan said. “You’re booking the bets… and offering certain odds to users. Whether you make money or not depends on the odds you set.”
Prediction markets like Polymarket and Kalshi act as neutral intermediaries that match trades without taking a side, making money via transaction fees. “You are not taking a side of the bet as the market in that case, which fundamentally changes the incentives involved and makes the product different in a holistic way,” Brogan said.
A Different Structure
Prediction markets aren’t structured to be gambling products. They’re tools for understanding, hedging, and creating public goods. That’s what makes them fundamentally different. For example, prediction market platforms don’t ban their best users in the same way casinos boot out card counting pros as it kills the house’s mathematical edge.
Regulatory Framework
The key legal distinction lies in the regulatory framework. In the U.S., prediction markets that are registered as Designated Contract Markets (DCMs) fall under federal regulation via the Commodity Exchange Act, which preempts state gambling laws. “Federal law in the United States preempts state law,” Brogan explained. “The Commodity Exchange Act includes a specific provision that precludes state regulation of federally registered derivatives. If you are federally registered, the states can’t regulate you.”
Kalshi‘s Advantage
Kalshi seems to feel confident in this argument, as the prediction market platform recently launched Super Bowl betting markets. Kalshi actively pursued registration with the Commodities Futures and Trading Commission – and fought its initial attempts to block election-related prediction markets.
However, this might not work for its competitors. “Polymarket, for example, is not registered in the United States, so arguably, states could go to its founder and say, ‘You’ve been facilitating sports betting, which is a felony in this state,’ and bring legal action,” Brogan said.
The Rise of New Entrants
While Polymarket and Kalshi are the two most recognizable names in the space, there are plenty of other new entrants following in their footsteps. One of which is the crypto exchange Crypto.com, which recently launched Crypto.com sports after filing self-certification as a DCM with the CFTC.
The key thing is that if the CFTC does not take action within 24 hours after the self-certification papers are filed, then the applicant can treat that as a green light. “If these are able to proliferate, and if the CFTC doesn’t take action, which they haven’t done yet, they’re going to end up eating these sportsbooks’ lunch,” Brogan concludes. “This is a $21 billion industry, and this new product is going to be way better.
