Renowned investor Ross Gerber likened prediction markets to “illegal sports betting” on Wednesday amid a legal crackdown on such platforms.
Gerber Asks Why Prediction Markets Are Allowed To Operate
In an X post, Gerber argued that platforms like Kalshi are nothing but unlicensed sports betting operations that violate state gaming laws.
“Prediction markets are just illegal sports betting operations that somehow has been allowed to exist,” the CEO of Gerber Kawasaki Wealth and Investment Management said. “Crazy this hasn’t been stopped.”
Gerber said that these platforms are classifying bets as futures contracts, superseding state laws in places like California, where sports betting is still illegal.
Sports Betting Dominates Kalshi Volume
Gerber’s remark was in response to data showing that volume on platforms like Kalshi is “overwhelmingly” dominated by sports betting. Further analysis showed that sports betting accounted for 72% of Kalshi’s all-time notional volume, according to Dune Analytics.
Legal Tussles Arise
The criticism comes at a time when prediction markets are facing legal scrutiny.
The state of Connecticut on Wednesday issued cease-and-desist orders to major prediction-market operations, including Kalshi, Robinhood, and Crypto.com, accusing them of conducting unlicensed online gambling, specifically sports wagering.
In response, Kalshi has sought an emergency temporary restraining order and preliminary injunction.
Last week, a Nevada judge reversed a crucial court win for Kalshi, ruling that contracts based on sporting event outcomes are not subject to the Commodity Futures Trading Commission. Kalshi has filed an emergency motion for a stay, pending appeal of the order.
Earlier, a New York State bill sought to ban sports-related and event-based betting on platforms like Kalshi.
A Burgeoning Industry
According to Dune Analytics, Polygon (CRYPTO: POL)-based Polymarket and Kalshi account for more than 90% of the prediction industry.
Notably, Binance co-founder Changpeng Zhao spotlighted a new prediction market on the BNB Chain, incubated by his venture capitalist firm, YZi Labs.
Benzinga has contacted Polymarket, Kalshi, Binance, and Robinhood for reactions to Gerber’s remarks and their overall position on sports betting contracts. A response from the California Gambling Control Commission is also expected.
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