TUCSON, Ariz. (13 News) – Arizona regulators are raising concerns about prediction market apps that allow users to wager on political events, sports outcomes, and other real-world occurrences, saying the platforms carry gambling risks that many users may not recognize.
Platforms like Kalshi currently allow users to bet on whether a governor will use specific words during a speech, whether legislation will become law, or how long a government shutdown will last.
‘A form of gambling’
Suzanne Trainor of the Arizona Department of Gaming said the apps fall squarely within the definition of gambling.
“Prediction markets are a form of gambling, so they also carry the same risks,” Trainor said.
Trainor said many of these platforms are operating outside Arizona’s regulatory system and are not subject to the same consumer protections required of licensed sportsbooks.
“What we do know is that we’re not seeing the same protections for responsible gaming and for gambling in terms of the licensed sports books that do exist,” Trainor said. “They’re playing by the rules. They’re licensed by our office. And so these prediction markets… are not working by the same rules, the same framework as others.”
Limited recourse for users
Trainor said users who encounter problems with unregulated apps may have little recourse.
“If someone is thinking, you know, I didn’t get my money from this app, they might call a state regulator, an office like us. And we’re actually not able to, in many cases, help them right away because we don’t have that relationship. They’re not regulated and licensed,” Trainor said.
Investment framing raises addiction concerns
Research from the American Gaming Association found that when betting is marketed like an investment, users may misunderstand the financial risks involved. Twenty-eight percent of prediction market users said they believe they are “investing,” compared with nine percent of traditional sportsbook bettors.
Trainor said that framing can contribute to problem gambling behavior.
“People viewing it as a side hustle as a means to make money. And what the data does tell us is people with those kind of beliefs are often not able to play responsibly,” Trainor said.
State seeks regulation, not a ban
The Arizona Department of Gaming has sent cease and desist letters to some prediction market companies. Kalshi, one of the largest platforms, has received one of those letters but continues to operate.
Trainor said the state is not opposed to prediction markets but wants them brought under state oversight.
“We’re not opposed to that, but we really believe that it should be state regulated. We have the people in place, the knowledge in place, and we really want to partner as much as we can with innovations in this space,” Trainor said.
Kalshi has not responded to a request for comment. The company has previously said it is federally regulated and provides transparency for users.
March is Problem Gambling Awareness Month. If you or someone you know needs help, text NEXTSTEP to 53342 or call 1-800-NEXT-STEP.
You can take a problem gambling self-screening quiz here.
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