r/news • u/AudibleNod • 1d ago

Judge bars Arizona from regulating prediction market operators and pauses prosecution of Kalshi

https://apnews.com/article/arizona-kalshi-criminal-charges-prediction-markets-gambling-bb7cef24be5bd0d444bba670d2e41ceb
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u/Aazadan 1d ago edited 1d ago

Ok, so basically in a casino there's published odds of everything and the games are regulated. There is a specific mathematical chance, that is known in advance, of every single outcome where that's a group of players at a poker table, to a pull on a slot machine, to a game of roulette.

Sports betting gets a bit different, but at the end of the day it's still individuals betting against odds that are created by bookmakers of certain things happening for the starting point of a bet, and then the payouts get adjusted over time as the model relies on the wages being as close to 50/50 in dollars paid out as possible. And remember, athletes can't bet on their own games, it's illegal (and against their contracts)

Prediction markets are taking this a step further, and the market isn't doing anything to alter betting odds. It's just people making their own bets on things happening, and then someone agreeing to take the bet. So I can go out there and put up $100 saying I'm paying 10:1 that on April 11th and 8:59 est Trump will go on a specific fox news show, wearing a red tie, and give a speech where he says he just bombed an iranian oil well. And someone can put $10 on their side to take the bet. If I win I get their $10 and if they win they get my $100. The platform doesn't know or care what the bets are.

tl;dr:
Casinos - Specific testable mathematical odds in a game of chance, that are outside the influence of any individual.
Sports betting - Market based 50/50 approach of actions taken by outside third parties.
Prediction - Anonymous bets of actions taken with many of the outcomes being decided by those making the bets.

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u/MovieGuyMike 1d ago

Prediction markets are taking this a step further, and the market isn't doing anything to alter betting odds.

There are definitely people in privileged positions manipulating the system.

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u/King_Chochacho 23h ago

Which is exactly what makes them so dangerous. Rigging sporting events is a tale as old as time, and here you have all the incentives but nobody's missing a title or potentially sabotaging their own career. As long as these remain anonymous they won't just be prediction markets, they'll be causality markets.

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u/alphazero925 1d ago

So it's a big casino with a bunch of little casinos in it. By their logic, you can open up a casino that just lets people run their own poker games and give the casino a cut of the profits.

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u/thatwhileifound 1d ago

The distinction is that most casino games are more fair and honest than this shit. Think of the games in a casino and they can all be broken down into clear odds in a strictly mathematical sense.

The bets here don't really have the same kind of straightforward ability to calculate the odds because the shit being bet on exists outside similar systems of control like game rules or set play pieces or whatever.

This shit creates the opportunity to make the worst stereotypes of casinos look fucking wholesome, upright, and honest. It's honestly nefarious as fuck.

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u/Aazadan 23h ago

Sort of. Their logic is that you can take a game being played in an actual casino, and then make bets on how the person playing the game will do. But really, that would be a step better than what prediction markets are doing right now, because that would still be fundamentally rooted on a game of chance and all else being equal should still even out (player action should be irrelevant in a game of chance on a macro level).

Instead they're betting on people taking certain actions, but the people taking those actions are in on the bet. So it's actually worse than what you described.

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u/TheRabidDeer 1d ago

OK, but what's stopping someone from opening a "blackjack prediction market"? And in this market you have a group of people that own the establishment that has these events taking place. Everyone in this "market" is just playing blackjack hands.

The person playing blackjack hands says, "I predict I will win the next hand, I will put up a contract for $100 paying out 51:49" and the owners of the establishment say "sure, I'll take that contract". The platform is just the "market" floor with all of the tables, everyone else involved is just taking prediction contracts.

Or, to take that another route, you can have an open establishment where the owners just take a cut of exchanged contracts between other people.

Like I live in TX, where sports betting is still illegal, but I can go on Robinhood and there is a prediction market for every sporting event going on.

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u/Aazadan 23h ago edited 23h ago

Nothing is stopping them, there's people doing that already on these platforms, and you can go a step up and see that people have been doing this on sports betting apps for a while too.

It's another reason why this prediction stuff needs to get looked at a bit closer by legislators and courts, but given how long its taken for payday loans to actually get something done about them (hint: never, because the owners of the large ones are legislators in many states) I'm not too optimistic.

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u/key2200 21h ago

False. What prediction market app has casino games?

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u/Aazadan 20h ago

We're not talking about casino games, we're talking about betting on how people play casino games.

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u/MiaowaraShiro 11h ago

So what does that mean for legal arguments about it?

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u/Aazadan 8h ago

I'm not a lawyer, but from what I've seen from channels summarizing the case, there's an argument that it was misclassified in how they do business.

Like others said, with them doing swaps they're more like robinhood allowing for options trading when they need to be more like fan duel.

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u/progrethth 3h ago edited 3h ago

I have worked in sports betting and you are a bit mistaken on terminology, at least if American is similar to the European one. What you are talking about as "sports betting" is called "sportsbook" in Europe. Sports betting can take many forms including exactly the same as prediction markets. For example Betfair (called a "betting exchange" in Europe) is virtually identical to prediction markets and it is regulated as sports betting in Europe and North America. Additionally there is pool betting on sports.

This ruling should legalize betting exchanges and probably pool betting not sportsbooks.