The Executive Director of the Pennsylvania Gaming Control Board (PGCB), Kevin F. O’Toole, has taken issue with the rise of sports wagering on prediction markets. O’Toole claims that the “growing presence” of these markets is a “significant threat” to Pennsylvania’s regulations.
In a letter to the Commodity Futures Trading Commission (CFTC), O’Toole urges the federal body to look closer at problems that can arise from the “dual-track system” that has emerged. States such as Pennsylvania still have to regulate sports wagering but have no control over prediction markets, which are handled at the federal level since they are considered contracts.
Legal, state-regulated gaming provides strong consumer protections and RG tools. Elizabeth Lanza of @PAGamingControl notes these important protections at today's RG Roundtable. pic.twitter.com/s4xvMMDG6t
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Predictions markets like Kalshi and Polymarket have seen an explosion of popularity over the last couple of years. However, while they were originally a combination of user-made and company-made wagers, Kalshi has been attempting to launch sports wagering for some time.
In its full launch of NFL wagers, its first week brought in $441 million. For comparison, that’s the equivalent of what was made during the US election season. The transition has also seen the company partner with FOX’s NFL coverage.
Prediction markets are a problem for Pennsylvania, says O’Toole
However, O’Toole and the PGCB see the encroaching prediction market as an issue, as despite it clearly being gambling, the classification means that the PGCB cannot regulate it. Quoted from the letter, O’Toole writes: “Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law.
“These markets effectively create a backdoor to legalized sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight.”
It should be noted on oversight that CFTC chair nominee Brian Quintenz has yet to be confirmed for his position. There’s been a couple of delays and postponements, and it’s now looking like the Trump administration is looking elsewhere. Quintenz is on the Kalshi board. It’s possible that another pick, Josh Sterling, could be on the cards, however. Sterling is known for arguing for prediction markets, having represented Kalshi against the CFTC.
Also on the board of Kalshi is Donald Trump Jr., the President’s son. He was the subject of ridicule in the most recent episode of South Park, which aired a parody of the prediction markets.
O’Toole also argues that the federal government shouldn’t be handling such small contracts on an individual basis. It also leaves a lot to be desired for consumer protections, something that is brought up in the letter:
“The jurisdictional clash carries a significant risk of resulting in inconsistent and inadequate regulation.
“The CFTC’s framework is designed for derivatives markets often involving sophisticated institutional participants. In contrast, state gaming regulators prioritize consumer protection for the public, implementing detailed measures for responsible gaming, age verification, and problem gambling prevention.”
Featured image: Pennsylvania Gaming Control Board
