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A daily podcast delving into the biggest stories of the day throughout the sports betting and igaming sector.
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Welcome to the iGaming Daily Podcast, analysing the news from the betting and gaming industry all over the globe, supported by OptiMove, the number one CRM marketing solution for the iGaming market. Prediction markets are no longer a niche experiment sitting quietly at the edge of the financial trading. They are now the center of global regulatory, commercial and strategic debates. In the past few weeks alone, we've seen Argentina move to block platforms outright, the US double down on its derivative space approach, and Brazil emerge as a potential new frontier with little to no regulatory clarity. At the same time, major operators and media giants are beginning to circle the space, raising a bigger question. Is this a new vertical or a direct challenger to the foundations of online betting? Today we are unpacking where prediction markets sit, who gets to regulate them, and whether this fast moving segment is heading toward global scale or regulatory fragmentation. Welcome to iGaming Daily, I am Fernando Nod, Media Manager for SBC and your host for today, where we will discuss this very intricate system that prediction markets are together with Ted Orme Clay, editor for SBC News. Ted, how are you today? I'm good, thank you Fernando. Thanks for having me on again. Yeah, interesting topic to get stuck into. Yeah, absolutely. And I think it's not ideal to forget your manager's job title, but we are joined together by Marty and Elliot, uh who's media um director? Media director, yeah. Yes, yes, nailed it. Well remembered Fernando. It's good job. It's nine months till your next performance review. The timing was perfect, right? Yeah, that's good. But good to be here to chat to you today. I don't think we've done the podcast together before, we Fernando? I don't think we have. don't think we have. So I'm under extreme pressure, you being my manager. So this has to be my uttermost best episode. ever, but it's going to be a great episode also because it's brought to you by OptiMove, the creator of positionless marketing and number one player engagement solution for DI gaming and sports betting operators. And I'm sure we'll get it done correctly as we always do. But of course, prediction markets at one point seem to be a US thing mainly because all news were coming from the United States in the past, of course, but we are seeing now that they are expanding. the rich across the globe. And one of the most resonant news last week was Argentina's decision to block Polymarket nationwide. Do you think prediction markets are still a niche financial product, like I said in the intro, or are they rapidly becoming a mainstream competitor to traditional sports betting? I'd say, I think they do in comparison to mainstream sports betting, I'd say they still are a niche. However, they are. in a very loose sense, they're clearly a very, very lucrative niche. But I don't think for the average man or woman on the street, the appeal of say, Polymarket or Cal-She would be a direct competitor to a betting product. I think for the average person who just wants to put a bet on the football match we're to watch at the weekend on the big horse racing event of the week, you're probably still going to be leaning more towards your classic sports, whether that's Fanjul or DraftKings, BetMGM in the US or over here in the UK, Bet365, William Hill, Betfred, whatever, the list goes on and on. think the thing that prediction markets have more a, some more leverage and some more appealing is the more extensive political side of it and how it kind of relates. You know what you said Fernando about financial services, financial markets. I think they're really at their core sports betting and prediction markets are going after different demographics really or appeal to different demographics. But there is to an extent, and we do see this more in the US, I think that's maybe where there's a bit more of maybe some concern from the betting industry of, well, perhaps these guys are uh taking our market share or are getting a more solid foundation in states that we, because the prediction markets are nationwide. You know, sports books in the US might be looking at and thinking these guys are already in states where we can't be active in yet. And they'll be able to build up more of a groundwork, you know, more of a foothold. But I think in other countries, I would say they're definitely more fitting into, this seems to be appealing to people who might be more interested in financial markets, who also have an interest in betting and have an interest in sports, rather than appealing to people who are just sort of directly interested in putting a bet on sports. That's my opinion anyway. Yeah, I'm fairly similar to you. um I think that they're obviously grown in popularity in places like California where sports betting not yet legal. But I don't think outside those sort of jurisdictions, there are a real threat to licensed sports betting for the very simple reason. They're a bit boring to play on if you've only got a small amount of money. mean, you can... You can do all sorts of things with $50 bankroll on a sports book, but prediction markets are a bit limited. I don't see this as an entertainment product in the same way that a sports book is. I think this is more for people with some serious money to put on and they're a bit more invested in what's going on in the financial markets, economic data, things like that, which you can't bet on a lot of American sports books. But I think the industry is in danger of overestimating the threat from prediction markets. And I can't help thinking that the people who've just invested in Cal-Chia, $22 billion valuation, may have cause to regret that in 18 months time. Okay, we'll have to hash and wait and see for that. If they eventually regret it or if they call us the email. Martin and say, hey, look who's laughing now, look who's regretting now not investing in prediction markets. But of course, you guys were mentioning the nature of prediction markets with a demographic that it's used to investments and used to trading in general. this brings me to a second question that arises a lot around prediction markets, which is who gets to regulate them. which seems to be one of the most complex things about them so far because uh some financial regulators are saying, hey, uh this is our territory. And then you have others, uh gambling regulators, like for example, in Argentina where the Lottery of Buenos Aires, which is also the regulator in the city of Buenos Aires for all gambling related activities, is the one that triggered the Van through the justice system. So it's bit of a fight, a bit of a dispute between the financial regulators and the gambling regulators. how should the regulators and policymakers approach this? And how urgent is it that they decide who gets to call the shots on the segment, Martin? Well, if I was a lawyer in the US, I'd hope not very quickly at all, because you can see all the court cases are starting to ramp up now and... As always, lawyers do very well out of this stuff. I think in the US, the position is fairly clear. It's been, you know, the CFTC, which is the in charge of financial trading and so on has stepped in, it's claimed jurisdiction over it, and it appears to be a federal matter. Now, you can look across sort of Arizona, Nevada, Kentucky, and those states are trying to push back on that. and say if you're betting on sports, should be regarded if you're, sorry, not betting, trading on sports in the prediction markets, it should be regarded as a sports bet and should come under the jurisdiction of the gambling regulators. think it'll, there's no real sign though that it'll move away from CFTC oversight in the US at the moment. The only thing that makes me think eh there could be a problem coming up. around regulation of the prediction markets is how much they're feeding into news coverage and political and particularly as we get near the midterm elections that coming up, which look like they might be somewhat tricky if Donald Trump is backing you as a candidate. As soon as they start getting bad news and emphasizing that every day in every news bulletin that you know, Donald Trump's favorite candidate is going to lose in Texas or California or wherever that is. I just wonder if the attitude might change a bit there. But um one thing to point out though, is while legally it's treated as sort of trading in the US, the American Institute for Boys and Men actually did a little bit research around this. and found that the vast majority of people think prediction markets are gambling and consider it, taking part in it as gambling. So there was room for a little bit of confusion, I think, and it'd be interesting to see whether that ends up in a lot of sort of class actions and so on in what is, of course, the most litigious country in the world. Yeah, I'd probably just build a bit on what Martin said. I I agree with a lot of what Martin just said there. I think to answer your question earlier, fear about, you know, the urgency of this, how urgent is it that regulators figure out which remit, who has the remit for this, under whose agenda they fall under. I'd say it's probably very urgent, yeah. You know, we've, we talked about earlier how we think this is a bit more of a niche in comparison to the more widespread and mass appeal of sports betting, but the sheer amount of money that's involved in it. would make you think, yeah, we need to figure out who exactly has the regulatory remit over these. mean, I Cauchy was claiming something like 150 million traded over the Oscars alone. And then with the Super Bowl, it was going up to billions, I think. So, you when you've got that amount of money involved on it, you need to make sure you know who's overseeing it, right? Like mine said, in the US, it seems pretty clear at the moment the CFTC is running the show, but that is getting challenged in the courts. It's also getting challenged. politically with legislation. think two senators have recently introduced a bill trying to ban predictions, which will be very interesting to see how that pans out. In other countries over in Europe, I think we're seeing a bit more clarity around it. Gambling regulators being quite adamant that they're not entirely on board with the whole prediction market thing. We mentioned this on the podcast for I think uh the Dutch KSA has initiated action against the polymarket. I'm pretty sure the Portuguese regulators kicked them out, Ukraine, Romania. In the UK, the UK GC has kind of had a bit of a different take and has said, don't, they're fine with predictions as a product, but they would have to fall under a UK GC license, which is, you know, may as well basically telling people like Polymarket and Calchic that they can't sell in the UK because those companies... would not want to have a gambling commission licensed because that would be effectively saying that they are gambling and would undermine their whole argument in the US, which is quite interesting. I think the developments in Argentina are obviously interesting with the idea still figuring out who exactly they fall under. It's similar kind of talks going on in Brazil as well, I think, where Calce recently launched only for the SPA to say quite soon afterwards that There is no regulatory framework for predictions in Brazil. Brazil is a country as well that's got quite a long history of uh financial innovation and fintech and things like that. So it's kind of interesting seeing how the predictions platforms could fit in the whole debate about betting regulation and fintech regulation there as well. But just to get back to the short answer, yeah, it's very urgent that they figure out. who should oversee these and it's constantly moving like what mine said about the media element as well that's going to add another layer of complexity to this that regulators will have to have a look at are we now going to have to make sure the predictions and their activities fall under a media regulator too? And we'll get to the Brazil and Argentina side of the prediction market landscape but first we're going to do a very quick ad break and we will be right back with more iGaming day. SBC Leaders connects the gambling industry's top tier operators and associations to share the best ideas, collaborate on solving the biggest issues, and push innovation throughout the betting and gaming industry. If you're an operator and want to join the discussion, visit sbcleaders.com for more information. And we're back with more iGaming Daily to continue discussing the present state of prediction markets all around the globe, particularly some uh interesting news coming from Latin America. But first, very briefly, I wanted to go back to something Martin said that maybe we are being extra cautious or we're giving too much credit to prediction markets and maybe they're not that big of a deal. in the long run. So we're seeing operators like Fandual and DraftKings balancing sportsbooks and prediction products. Do you guys think this is a hedge or is it a strategic pivot? I think it's a little bit of both. Having the technology and they've largely sort bought in the technology to do it, although, know, Fandual would have had it within the group already. It gives them the option to roll it out and they've rolled out to a lot of states, but they've limited where you can predict on sports markets to places where they don't have licenses for um sports betting in there. So it's a way for them to tap into California, Texas, Florida, these huge population centers, which they currently excluded from on their main product. And that opens up two points to discuss. One is that if this continues being regulated at federal level, Will states, will California look at the volume of trading on sports on prediction platforms and say, well, in order to get some of that money to deal with our enormous budget deficit, we should perhaps legalize online sports betting net. At which point all that customer data that Cal-Sheet, Fandual and DraftKings are getting from running their prediction markets there will be hugely useful. The other point. is if they're going to go up directly against Cal-Sheet and Polymarket at this point, does their uh superior brand presence, I mean, everyone in the US knows who DraftKings and Fundual are, a uh smallish proportion of people know who Cal-Sheet are. Does it give them a huge advantage in the States where they're going head to head with Cal-Sheet and Polymarket? Does their additional advertising budget, the national advertising campaigns they can run, will that make life extremely difficult for calcium polymarket at this time. So it'll be interesting to see from a commercial point how it works out and whether it actually shifts the needle a little bit on regulation in some states. And of course, it's time now to go down south, come to my land. Argentina, of course, is blocking platforms like polymarket. And this may indicate that the regulators will see prediction markets as gambling, as illegal gambling, because of course they have no license. And then you have Brazil, like Ted said, saying, hey, we don't have the tools to regulate this or to treat this as gambling. it's a bit of a wait and see here too on whether the regulators will... eventually decide to treat this as gambling or as a financial structure. So what I want to discuss now is the culture move in Brazil. Do you think this creates an opportunity for other operators, other prediction market companies like Polymarket, let's say, to enter Brazil? And how do you think, how do you interpret this culture move? Is it like a bold move for them to go into Brazil so early on or? Is it actually too premature? I understand why they've launched there, to be fair. They've probably been following the development of the regulated betting industry there since it launched in January last year. Probably been following that quite closely. They've seen the pretty impressive growth that's recorded. uh I mentioned earlier, Brazil has always had quite a vibrant and very active and rapidly growing finance scene as well. You know, Sao Paulo is one of the biggest businesses in South America. There's a huge amount of FinTech and payments companies based there. know, back when I worked on the payments side of SVC, we were always writing about PICS and how that was considered so revolutionary by a lot of different countries and a lot of different stakeholders. So think CalSTRI have probably been joining the dots there and thought there's definitely a niche for us here in Brazil. The trouble is though, is a bit like what you've mentioned is the fact that there's not really much of a regulatory framework there. I guess so that doesn't mean for them that they're probably looking at it thinking, well, we're not doing anything illegal. It's just not fully regulated. I guess it's a bit of a gray market for them. And they're not the only one looking at doing it. think the names escape me now, but there's quite a prominent Brazilian finance firm that was developing their own product there. pretty sure Polymarket will also be eyeing it up. There's murmurs of some other stakeholders, interesting setting their predictions platforms up as well. So yeah, there's a lot of potential there for these companies, I think, for them to find a similar niche that they've found in the US. On the topic though, you said about perhaps they're being a bit premature. I'd maybe say not premature because there isn't a regulatory framework. I think they might be more premature because we've already started seeing there being... Quite a lot of political backlash against gambling in Brazil right now. President Lula has already been, he's started wanting to curb the sector a bit, for want of a better word. em Obviously, despite it coming into existence under his presidency, we're seeing taxes going up, seeing a lot of discussions around uh advertising, player protection. There's a lot of concerns about the societal impact of gambling. And I think really given how much the conversation around predictions is often making that comparison between whether they're gambling or whether the financial services, it's only inevitable that they're going to get factored into that, to the Brazilian conversation as well, as both betting and predictions continue to develop there and make more money. I wonder if this is a little bit the Brazilian state doing what the Brazilian state does, inviting in overseas companies to come and set up, get established and then Once they see there's some money there, world regulation will follow, be tight and taxes will follow. And those taxes will be punishingly high for overseas companies trying to do business there. Call me cynical, but it looks as straightforward as that to me, the prediction markets in Brazil. Yeah. Well, it wouldn't be a surprise after what happened to online gambling with President Lula himself, even though he did say that he was against it. He signed the online gambling bill and now he wants to ban the segment altogether. now he got all the tax money and now that the election is coming, all of a sudden his moral compass has turned. uh It wouldn't be a surprise, Martin, that's for sure. I think we already covered the matter of whether um prediction markets will remain a parallel ecosystem or if they will turn into a mainstream product. I think that the conclusion was that they will not at least in the short term with the prediction markets being a more niche product for traders and people who are in investment and all that stuff. with these different approaches to regulation, the SBA is saying, hey, we don't know that the Argentine government treating us gambling, the US treating us as uh financial derivatives. Are we heading towards uh fragmentation where prediction markets are legal in some jurisdictions and banned in others, similar to what we've experienced in the early stages of online gambling. Yeah, I think we're already there to an extent, like you mentioned with Argentina taking a very firm stance against Brazil being a bit of a grey zone and the US at the moment embracing it, well the CFTC at least I guess. And then over in Europe as I mentioned, it seems this stance is pretty much quite heavily against them, or if they are in favor of them, they want it within a regulated gambling framework, which these companies wouldn't want to do. I think the question more of is how long will this fragmentation last and how much will that hinge on what's going on in the United States? That, you know, the US is really, as we've established, kind of the core driver behind these markets, chiefly as Martin mentioned. because of the fact that they're available in California and Texas, two of the biggest states, two states with a huge amount of wealth and a massive populations where these companies are basically kind of filling the gap where regulated sports betting isn't there. The question hangs on, as Martin said, and regulated sports betting does occur in states like California and Texas, will that wipe out demand for prediction markets and make them even more of a niche for just within people who are interested in financial services and trading? But also B, if Yeah, as I've mentioned before on other podcasts, let's say the next election, Donald Trump, well, Trump technically won't be running, would he? Unless he wants to again, we don't know. We'll see how that pans out. But let's say the next administration, let's say it goes back to being Democrat, under Joe Biden, the CFTC was much more critical of prediction markets, was going a lot uh harder on them than under Donald Trump, where they're the CFTC seems to be firmly in the prediction markets corner. What would really need to happen is have a change of administration and that could go back the other way. And the CFTC would start being harsher on them again and take more of an oppositional stance. And that could, yeah, start being theoretically the kind of beginning of the end of it, but at least of them in predictions and maybe we'd see them shift more towards this media kind of angle that we've talked about and, and polling and so on. So I think like to Sorry to have gotten a bit of a rant there, but yeah, I think we're already seeing a fragmented ecosystem. The future of that depends on whether the US gives them the green light or eventually gives them the red light. Ted, just in case you're interested, on Kalshi, it's a 26 % chance that Trump will run for a third term, despite what the law says. I think... It doesn't really matter. So gambling operators, for instance, are used to having uh different regulatory regimes in different countries around the world. It's the same if you're a foreign exchange platform or you're a stock trading platform. You have to adhere to local regulations wherever you are. And that tends to make it quite difficult for uh single brand companies of that kind of trading type nature, whether you want to call it gambling or you want to give it a veneer of financial respectability and call it investment. It's very difficult for them to scale internationally. If you think about it, how many truly global betting brands are there? Bet365 and then in the regulated space, Bitano maybe. And then after that, you're looking at the people who just ignore the regulation and are quite popular without it. So I think it. This will be fragmented, the picture around the world. think the company, know, the companies and their investors, the investors behind it are used to that situation and will expect it. Of course, there's a lot more to discuss on prediction markets and we could sit here and talk about it for maybe five more minutes, but we don't have five more minutes. So this has been all for today's episode. We will continue to monitor the predictive market situation across all SVC media products. So make sure you are subscribed to SVC media newsletters and follow iGamingDaily on social media and your preferred podcasting platform. Also make sure you check out the Payment Expert podcast, a new um product, of course, focused on payments. That has been all for today. Martin, Ted, thank you very much. Nothing in this episode was financial advice. Thank you very much, Luke Miles, for producing this episode. I'm Fernando Nott and to our listeners out there, we'll see you in the next one. Goodbye. Thank you for listening to today's iGaming Daily Podcast, supported by OptiMove, the number one CRM marketing solution for the iGaming market. If you want to find out more about some of the subjects raised today, Feel free to explore any of the sites in the SBC News Network or check out the latest edition of the SBC Leaders Magazine. Happy reading.