Like racing, states are concerned about prediction markets

In the two weeks since the last Dollars & Sense column about prediction markets and other unlicensed outlets that accept horse racing bets, stories about prediction markets suddenly seem to be popping up everywhere.

Granted, that buzz probably isn’t all trace to that column.

But 60 minutes jumped in with a story about prediction markets, which operate under the Commodity Futures Trading Commission. And a number of sites that focus on gaming news have paid significant attention to prediction markets.

While most of the market’s predictions to date have taken place on US and international events – think election results or an upcoming Federal Reserve decision on interest rates – these sites have also offered action on sports and horse racing. At this year’s International Federation of Horseracing Authorities conference, Tom Chignell, integrity projects adviser for the Hong Kong Jockey Club, said $1.2 million was bet on this year’s Triple Crown races on a prediction market site.

Since betting through these prediction markets does not support the wallets or traces of the sport, this is obviously a concern.

So if you haven’t already, read that column, which highlights 1/ST Racing’s litigation efforts to protect the sport from unlicensed gambling channels that do not benefit the sport. A recent court decision awarded 1/ST Racing more than $3.6 million from an unlicensed offshore site that took bets at two of its tracks in California. Because this ruling was made under the Interstate Horseracing Act, a similar legal approach may be able to protect racing from emerging prediction markets.

Which brings us to this week’s column: The racing industry is not alone in its concerns about prediction markets.

IGaming company has posted a number of stories about legal challenges to prediction markets from both states and Native American tribes. It reported on Dec. 8 that Christopher Hebert, chairman of the Louisiana Gaming Control Board, issued an opinion that prediction markets are offering sports betting that does not comply with state law.

“It is the Board’s position that such activities constitute sports betting under Louisiana law and are not conducted in accordance with the Louisiana Gaming Control law or under a valid Louisiana-issued license or permit,” reads the letter obtained by iGB.

Additionally, the board’s letter noted that entities participating in prediction markets could jeopardize their sports betting licenses.

“The Board is issuing this opinion to clarify that any direct or indirect involvement in the operation, offering or facilitation of sporting event (prediction market betting) contracts may impact a Regulated Party’s eligibility for licensing or permitting in Louisiana.”

IGB reports that other states are taking a similar stance, which is sure to catch the attention of a number of recognized outlets that have entered or are entering the prediction market arena; a group that includes DraftKings and FanDuel. These two sites also offer licensed pari-mutuel betting on horse racing.

The gaming news site reports that “there are more than two dozen active lawsuits nationwide related to prediction markets, many of which are Kalshi against state regulators. There are also tribal arguments that prediction markets violate the Indian Gaming Regulatory Act.”

This lawsuit suggests that racing will have at least some powerful friends as it tries to tackle this latest threat to the licensed pari-mutuel betting industry that serves as a driving force in its business model.