Days before one of the biggest sports betting events of the year, New York Attorney General Letitia James has issued a warning about prediction markets.
James wants New Yorkers to be aware that rules for prediction market (PM) platforms may differ from the regulations traditional sportsbooks in New York operate under.
James’ statement, issued Monday, was timed for the lead-up to Super Bowl LX between the New England Patriots and Seattle Seahawks on Sunday. PMs like Kalshi, Polymarket, and newer ones aligned with online sportsbooks like DraftKings Predictions and FanDuel Predicts, are providing consumers with options to put money down on game options and on individual player outcomes – what gamblers would identify as “prop bets” – akin to what they could find on online sportsbooks.
James urged caution.
“Ahead of the Super Bowl, New Yorkers need to know the significant risks with unregulated prediction markets. 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.”
An unprotected environment
The release from her office also warned that while “prediction markets may appear as modern, high-tech platforms for speculation or ‘forecasting,’ they may function as hubs for unregulated gambling without the basic protections New York consumers both deserve and expect from properly licensed operators.”
Those include:
- Allocating resources to develop and fund programs to combat problem gambling
- Implementing procedures to prevent underage gambling
- Enforcing restrictions to prevent predatory or deceptive advertising
- Utilizing procedures to identify customers battling a gambling addiction
- Creating guardrails to allow consumers to exclude themselves from the platform
- Upholding prohibitions against insider betting and requiring regulatory review to ensure the financial stability and integrity of gambling operators
Is regulation coming in NY?
State Sen. Jeremy Cooney (D-Rochester) is seeking to change that in New York’s Legislature, forwarding a bill, S8889, that would impose stricter regulations and restrictions on PMs.
Per the bill’s language, it would require a PM platform to get a license from the state’s Department of Financial Services to operate. It would also establish standards for conduct, with the Department of Financial Services having enforcement authority, and a PM would also need to include extensive anti-money laundering programs.
The law would also broadly define a PM as any platform, electronic or physical, that allows participants to place wagers, trades, or financial positions on the outcome of future events, including but not limited to political, economic, weather, or other contingencies, where payouts are tied to event outcomes.
Assemblyman Clyde Vanel (D-Queens Village) wants to go even further with his proposed ORACLE Act, an acronym for “oversight and regulation of activity for contracts linked to events.” Per his proposed legislation, PMs in New York could not offer contracts involving individual sports performances or federal elections. It would also curtail activity around natural disasters and fatal events.
