Prediction markets, according to Better Markets, a nonpartisan public policy organization, are actually providing betting services under the cover of "event contracts."

The group, which has quickly grown to be a frequent and outspoken critic of the industry, claims that well-known prediction market operators use the jargon of event contracts to get around state gaming regulations, adding that these companies provide services that are strikingly similar to those offered by casinos and sportsbooks.

"These activities are no different in substance than gambling at a casino, sportsbook or corner bookie, which is why ‘prediction market’ users can bet on everything from elections and sporting events to the Golden Globes and the return of Jesus Christ,” says Better Markets.

The group isn't afraid to criticize the sector. Prediction markets "gamify" finance by obfuscating the distinction between betting and investing, possibly tricking young, inexperienced retail investors, according to a January analysis by Better Markets.

Better Markets also criticizes the CFTC

Better Markets openly questioned the Commodities Futures Trading Commission's (CFTC), the federal regulator of prediction markets, ability to effectively regulate a new type of wagering that is currently accessible nationwide.

“The CFTC is a federal financial regulatory agency with no experience, expertise, personnel, technology or budget to police gambling in all 50 states covering an unlimited number of topics, and trying to do so will distract the CFTC from its critical mission of policing the multi-trillion derivatives and commodities markets,” adds the group. “All Americans depend on the CFTC to make sure that everyday essentials from cereal at breakfast and bread for lunch sandwiches to gas for the car and oil to heat a home, are available at the right time, in the right quantities, and fairly priced based on supply and demand.”

These comments came at a time when more legislators and leaders of tribal gambling are urging the commission to examine forecasts more closely. Some agree with Better Markets that the commission lacks the expertise to regulate gambling as it was not established to do so.

Prediction market operators sometimes cite the Commodities Exchange Act (CEA), which gives the CFTC the power to regulate futures, options, and swaps under the condition that those derivatives have actual financial utility. State authorities and critics contend that event contracts related to sports, among other things, are ineffective financial tools.

"Unleashed Unregulated Gambling" in Prediction Markets

Prediction market operators are frequently accused of violating state gaming regulations because they lack state gaming permits. Better Markets agrees with that idea and goes one step further, pointing out that yes/no transactions take advantage of young people.

“These companies have unleashed unregulated nationwide gambling without the involvement or review by any elected official, regulator, or policymaker, even though there is a very significant public interest in properly regulating gambling to keep criminals out, prevent minors from engaging in gambling, prohibit the use of nefarious gamification and AI deepfakes, deal with addiction and other social consequences like alcoholism, drug abuse, bankruptcy, spouse and child abuse and other anti-social activities often associated with gambling,” said the policy group.