(AsiaGameHub) –   The Coalition for Prediction Markets, an organization representing prediction market platforms, has urged U.S. regulators to clarify how federal regulations define “gaming,” expressing concern that a broad interpretation could hinder industry growth.

The Need for a Narrow Definition

In a letter addressed to Christopher Kirkpatrick at the Commodity Futures Trading Commission (CFTC), the group contended that current rules may incorrectly classify activities that should not be considered gambling.

Companies such as Kalshi assert that their offerings are financial instruments, not gambling services, maintaining that event contracts enable users to trade on real-world outcomes in a manner that generates valuable market insights.

Central to the debate is a CFTC regulation that prohibits contracts related to “terrorism, assassination, war, gaming, or any activity unlawful under state or federal law,” as well as other actions deemed contrary to the public interest.

The core issue lies in the interpretation of the term “gaming.”

The coalition is requesting the agency to define the term narrowly, restricting it to casino-style games rather than encompassing sports-related contracts. They argue this distinction is crucial to differentiate prediction markets from conventional gambling.

“The Coalition advocates for a formal rule defining ‘gaming’ to include only casino-style games traditionally regulated by states. This would clearly distinguish event contracts traded on designated contract markets,” the letter stated.

The matter has already arisen in court. Judges in the Ninth Circuit recently questioned why casino gaming would exclude sports betting, noting that wagering on sports is a common feature in casinos.

The “Economic Significance” Factor

The coalition emphasized that prediction markets function differently.

“Event contracts on DCMs are linked to real-world events with potential financial, economic, or commercial implications. Wagers on casino games lack any economic significance beyond the bet itself.”

In contrast, state regulators maintain that contracts tied to sporting outcomes fall under state sports betting laws, which require licensing and are administered locally.

Additionally, professional sports leagues are seeking more stringent oversight, contending these markets present risks similar to traditional betting but currently lack comparable safeguards.

Among proposals submitted during the public comment period, which concluded on May 1, are recommendations to raise the minimum participation age to 21, implement real-time monitoring for suspicious trades, and restrict certain contract types involving injuries or officiating decisions.

Now, the CFTC must determine whether to revise its rules—a decision that could influence the trajectory of prediction markets in the United States and clarify whether they will continue expanding into sports-related contracts.