Sports betting products should not be promoted as investments

If you live in the United States, you can’t go an hour without seeing ads for sports betting or prediction markets on TV, radio and billboard advertising. Sports betting ads for FanDuel, DraftKings, BetMGM, BetFanatics and other sites are on constantly in the 38 states plus Washington DC where sports betting is legal, but prediction market advertising is even more prevalent since it’s legal in all 50 states as prediction markets are not considered sports betting, but rather a form of "investing." Unlike sports betting, which is regulated by state gambling commissions, prediction sites are regulated by the Commodity and Futures Trading Commission (CFTC), which oversees and regulates trading on all derivative markets including futures, swaps and options. This includes commodities like agricultural products, silver, gold, oil, cryptocurrencies, and since 2022 prediction markets as well.

The CFTC's mandate as stated in its vision statement is:
"To be the global standard for sound derivatives regulation, aiming to foster open, transparent, competitive, and financially sound U.S. derivatives markets by promoting integrity, preventing fraud, and protecting market users, all while striving for innovation and global leadership in market oversight."

The key words in that statement are "transparent", "integrity" and "preventing fraud" which is why in 2023 the CFTC told Kalshi to stop offering prediction markets on elections and political events claiming they were a form of gambling and not trading. While the CFTC did not try and stop Kalshi from offering contracts on things like egg prices or the closing price on the NASDAQ, it did have an issue with political markets, which it said was not in the public interest and could be wrought with fraud and insider trading. Kalshi fought back and the issue went to court.

In 2024, New Jersey courts sided with Kalshi, which the CFTC appealed. But after it became clear other courts considered Kalshi’s offerings legal, the CFTC dropped its appeal in May 2025, meaning that prediction markets were perfectly legal and all markets had to be overseen and regulated by the CFTC. Boldened with that win Kalshi started offering wagering on sports futures, including events like the Super Bowl and weekly games to which the CFTC decided not to challenge. Instead, the individual states issued cease-and-desist orders against Kalshi and despite a win for Nevada in the courts against Kalshi, it seems like it’s full steam ahead as Polymarket and now sports betting sites like FanDuel, DraftKings and BetFanatics have started to offer sports related prediction markets as well.

The question that must be asked is whether the CFTC’s initial complaint against Kalshi was warranted, regardless of the court's ruling that prediction markets are legal? I spoke to someone connected to the CFTC who said that they know there is insider trading and probably forms of fraud involved with prediction markets on things like the Venezuela invasion by the United States, but the courts tied their hands. My source said that the CFTC will continue to regulate the sites, but unless there is blatant fraud or insider trading that they can prove beyond a reasonable doubt, they really can't act. As far as they are concerned prediction markets need to be treated as just another form of investing.

Investing or Betting?

That said, most analysts and gaming lawyers I spoke to agree that what is being offered by Kalshi and Polymarket is just another form of betting and the notion that a futures position on the Super Bowl should be treated the same as a futures position on gold or the price of oranges is just silly.

I spoke to a trader with one of the largest investment companies who said that equating prediction markets on politics or sports futures with traditional investing on stocks or commodities is not only ridiculous but also dangerous.

"Most people in North America and Europe for that matter have most of their retirement savings tied to stocks and bonds as well as some commodities like silver and gold. The investments are always seen as a way to grow equity so that by the time one is ready to retire there is enough money to pay for the necessities of life. Naturally some portfolios are more aggressive than others, but the whether one is investing in a balanced fund or a high growth fund the key is that the investors know that they are investing in actual companies or products and even if the price goes down over time, there will always be value left in their investments.

That is the biggest difference between true investing and what these prediction sites are offering. If you are “investing” on the Super Bowl result then your investment is either going to be worth more than you invested or nothing if you don’t sell before the game finishes. Similarly, if you are “investing” in the Democrats to control the House of Representatives in November 2026, you are either going to be right and get more than your investment back or it’s going to be worth nothing and you lose your whole investment. I use the term investment here very loosely though because by definition if something is either worth more than you put into it or nothing then it is gambling and not investing. Nobody that is trading in gold stocks or physical gold is willing to lose it all in a few months time.

But that’s the reason why what these prediction sites are doing is also very dangerous. For the majority who are using prediction sites they know for a fact that they are simply gambling in a different form, but there are some who will believe that what they are doing is investing and may not realize that they could lose everything. To make matters worse, in states where gambling isn’t legal like Utah or Hawaii, people may somehow believe this can’t be gambling since that’s illegal in their state and hence feel that buying a contract on the next President of the U.S. is no different than investing in soybean futures and of course they are wrong. I have no issue with gambling but call it what it is. At our company we have professionals who work hard, go through extensive training and do mounds of research to help people increase their wealth so they will be set when the time comes, but we would never tell them that going to the casino or putting their savings on the winner of the World Series is a good investment strategy. And I would hate to see a 70-year-old grandmother lose everything she has because she thought that because the product is regulated by the CFTC it must be a legitimate form of investment."

Kalshi ads lead the way

Unfortunately, it seems that advertising for prediction sites is also tricking some people into mistaking gambling for investing as can be seen by the famous AI ads created by Kalshi for last year’s NBA playoffs, as well as ads by ProPicks where Marshawn Lynch is golfing and trading on the other player’s score. But what seems to upset people the most are the ads that say “you can trade on that” with the implication that trading with Kalshi is a good way to make quick money because there is always something to trade on. One poster on a gambling forum wrote:

Kalshi latest ads promote “investing” in Kalshi’s markets as an excellent way to make extra money. This advertising campaign is WRONG on so many levels. Anti gambling groups and governments are highly upset at sportsbooks for offering promotions and incentives that prey on the less disciplined; not that anyone on this forum would succumb to that manipulative approach. I can’t imagine how outraged they will and should be at Kalshi telling people to “invest” to make extra income. Who is running Kalshi? Jim Feist or Ed “The Professor” Horowitz? This would be their marketing campaign in a heartbeat.

While I couldn’t find any specific Kalshi ads that say are exactly what the poster said, the intent of the poster’s comment is correct that one of the rules that almost every gambling commission requires before they’ll issue a license is an agreement by the operator to never make a customer feel that they will win in the end and will have more money than before they started gambling wit the site. In fact, the RG rules and links that operators use on every site in North America specifically states the following:

 - Treat it as Entertainment: View losses as the cost of fun, not a way to earn money or solve financial problems.
 - Never Chase Losses: Don't try to win back money you've lost; this leads to bigger losses.

So, any implication that prediction markets do not fall under these rules because it’s investing, rather than gambling, is misleading.

When I look at prediction markets I think back to the days when I was just starting out and looking for ways to make money. When I first had some disposable income, I put some money away for gambling and some for investing. The first stock I ever bought was five shares of a major bank whose stock price has skyrocketed in the nearly 30 years that I’ve held it and still do today. The money I used for gambling obviously was mostly lost. But then I learned about penny stocks trading on the OTC market. I spoke to investment managers who called them nothing more than a form of gambling and said that for every penny stock that will become an eBay or Google there are thousands that will go to zero by the year end. I decided to invest in five of them anyways, realizing it’s disposable income that I’m willing to throw away on a whim, and every single one became worthless within a year. That’s when I realized that just because something is called an investment and is traded on the stock market it is anything but. As the trader said to me in this article, I have no issue with gambling but call it what it is. The same hold true for prediction markets. To suggest otherwise is not only misleading but is unfair and dangerous to those who don’t know the difference and who may not be using disposable income as something they are willing or can afford to lose.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!