Prediction Markets Chase Super Bowl Moment Despite States’ Regulatory Crackdown

Only this year, there’s a new player in town. Prediction market platforms such as Polymarket and Kalshi are also seeing a surge in activity tied to the game and its surrounding ecosystem, from outcomes on the field to broader event-driven contracts.

On Tuesday (Feb. 3), Crypto.com announced it was getting into the red-hot events contract marketplace too, launching a dedicated, Commodities Futures Trading Commission (CFTC)-compliant platform called OG just days before the Super Bowl.

For an industry that has spent much of the past decade on the fringes of public awareness, the Super Bowl represents something close to a coming-out party. Yet the moment is arriving with a thicket of caveats.

For one, the prediction market boom is all playing out against a backdrop where the National Football League (NFL) has upheld its ban on platform operators purchasing Super Bowl television ads, a symbolic reminder that mainstream legitimacy remains elusive. More consequentially, the regulatory environment surrounding prediction markets remains unsettled. As interest peaks, the industry is threading a narrow needle between federal oversight and an increasingly assertive patchwork of state regulators, each with its own interpretation of what these markets are, and what they are not.

Read more: Prediction Markets Turn Uncertainty Into a Business Model 

The Patchwork Problem Ensnaring Prediction Markets

At the federal level, the CFTC has been the event contract and prediction market industry’s primary overseer, treating certain prediction markets as derivatives exchanges. The agency’s stance has been anything but static.

In 2024, the CFTC proposed a rule that would have sharply limited sports- and politics-related contracts, effectively curtailing the most popular categories driving user growth, but that proposal now appears to be receding. The CFTC’s current chair has stated that the agency will withdraw the 2024 proposal and directed CFTC staff to move forward with drafting an event contracts rulemaking.

“Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives,” CFTC Chairman Michael S. Selig said in a speech on Thursday (Jan. 29). “I have directed CFTC staff to reassess the Commission’s participation in matters currently pending before the federal district and circuit courts.”

There are several instances where jurisdictional questions remain at issue around prediction markets, with several states having moved to classify prediction markets as gambling, bringing them under existing sports betting statutes.

See also: Prediction Market Boom Blurs Line Between Trading and Gambling

From the perspective of states, sports betting is a lucrative, tightly regulated industry that generates tax revenue. Allowing parallel markets to operate under a different legal framework risks undermining that system. From this perspective, prediction markets can look less like innovative information platforms and more like regulatory arbitrage. For context, 39 U.S. states allow sports betting, while seven states allow online casinos.

Nevada, home to the most mature gambling regulatory apparatus in the country, has taken one of the hardest lines, temporarily banning Polymarket from offering sports and event contracts to residents outright, including during the period in which the Super Bowl will take place.

Other states are testing similar theories through litigation and administrative actions, with Massachusetts emerging as a bellwether. An injunction against Kalshi is currently on hold until Wednesday (Feb. 4), and according to a report by NPR there are 19 federal lawsuits pending at various stages leveled at Kalshi alone.

The irony is that the markets’ core promise of aggregating dispersed information depends on scale. Oversight fragmentation is not just a regulatory inconvenience but could strike at the economic logic of the model.

See also: Prediction Markets Eye US Growth While Watching Out for Crypto Whales 

Information Versus Entertainment

At the center of the regulatory debate is a philosophical question with practical consequences: are prediction markets about information or entertainment? The industry’s advocates lean heavily on the former, citing research showing that markets can outperform polls and experts in forecasting outcomes. They argue that participation incentivizes users to seek better information, producing socially valuable signals.

Regulators tend to emphasize the latter. When markets are tied to sporting events with emotional fan bases and high-stakes narratives, the informational value can appear secondary to the thrill of participation. The fact that many users approach these platforms with the same mindset as betting apps may not help the industry’s case.

For now, prediction markets are enjoying their Super Bowl moment under a cloud of uncertainty. They are big enough to matter, but not yet secure enough to relax. Whether this moment marks a turning point toward acceptance or the beginning of a regulatory reckoning will depend less on the score of the game than on how convincingly the industry can argue that it is selling insight, not just excitement.