In the lead-up to the Super Bowl, the Attorney General of the biggest online sports betting market in the U.S. warned that using prediction market platforms is a risky bet for the public.
“Ahead of the Super Bowl, New Yorkers need to know the significant risks with unregulated prediction markets,” said New York Attorney General Letitia James in a consumer alert issued on Monday. “It’s crystal clear: so-called prediction markets do not have the same consumer protections as regulated platforms. I urge all New Yorkers to be cautious of these platforms to protect their money.”
The release stated that prediction markets offer bets “masquerading as ‘event contracts'” on the outcomes of sports, political elections and other future events.
“These platforms operate without consumer protection and without the supervision of the New York Gaming Commission, putting New Yorkers at significant financial risk,” added the AG’s office’s notice.
New York AG warns industry, not just consumers
The notice from the office of the chief legal officer of the biggest online sports betting market in the U.S. opined that while prediction markets may appear as modern platforms for speculation or forecasting, in practice, many operate as unregulated gambling without the kind of consumer protections provided by licensed sportsbooks.
In particular, the release asserted that prediction market platforms do not implement controls to prevent underage gambling or predatory or deceptive advertising, are not required to undergo regulatory reviews to ensure financial stability and integrity, do not offer protection guardrails like self-exclusion and do not devote resources to responsible gambling programs or identifying customers suffering from problem gambling.
Meanwhile, Attorney General James also warned the gaming industry that the conduct, advertisement and promotion of unlicensed sports wagering violate New York’s gambling laws and could be subject to civil and criminal liability. Several New York-licensed gaming operators, such as FanDuel, DraftKings and Fanatics, offer a prediction market product in states outside of New York.
Always check your sources, says NY
James’ notice stressed that to protect themselves, consumers should conduct their own due diligence on the platforms they use. It warned that if a platform is not licensed by the New York Gaming Commission (NYSGC), which can be checked online, the site may be operating illegally in the state of New York.
The AG’s office also cautioned New Yorkers to avoid risking money they cannot afford to lose, and to treat prediction markets as high-risk with “no guarantee of returns, and no guarantee of access to your funds.”
State AGs speak up
Numerous state gaming regulators have taken various actions against prediction markets in the last 12 months, ranging from public warnings to sending cease-and-desist notices to, in some cases, filing lawsuits. In October, Kalshi sued the NYSGC after the Empire State regulator sent it a C&D. While that lawsuit did not name James as a defendant, some suits filed by prediction market companies in other states are targeted at the state’s AG as well as its gaming regulator.
Some other attorney generals in the U.S. have also weighed in on prediction markets. In June, 34 AGs from across the political spectrum filed an amicus brief in Kalshi’s court battle with New Jersey. One of those, Massachusetts AG Andrea Joy Campbell, later sued Kalshi in state court in September alongside the Massachusetts Gaming Commission.
Then, in October, another of those 34 AG signatories, Arkansas’ Tim Griffin, issued a formal opinion determining that operators such as Kalshi that offer sports contracts are engaging in illegal gambling if they do not have a sports betting license. “The fact that a company has rebranded this gambling activity as a ‘prediction market’ does not protect it from scrutiny,” said Griffin in his opinion.
