New York Attorney General Letitia James has issued a consumer alert warning residents of the financial risks posed by prediction markets ahead of Super Bowl Sunday.
The AG argued the platforms are effectively offering bets disguised as event contracts, and that they operate without consumer protection and outside the supervision of the New York Gaming Commission.
It comes amid growing disputes between prediction market operators, which are federally regulated by the Commodity Futures Trading Commission (CFTC), and state gaming regulators that argue the contracts are gambling, not financial trading.
James said: “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.”
James also issued a warning to the prediction market industry, stating that the conduct, advertisement and promotion of unlicensed sports wagering violates New York gambling laws and could result in both civil and criminal liability for those involved.
AG says prediction markets lack safeguards
The alert pointed to a lack of key safeguards on the platforms, including protections against problem gambling, underage participation and predatory advertising.
Unlike licensed betting operators, it continued, prediction markets are not required to implement self-exclusion tools, fund problem gambling programmes or undergo regulatory review to ensure their financial stability and integrity.
The alert also claimed the financial industry has begun issuing reports of increased financial risks associated with prediction markets, including the overextension of credit and rising loan defaults.
The AG’s intervention comes as court battles rage across the US over whether the emerging vertical can be regulated at a federal or state level, and whether it constitutes gaming.
Meanwhile, the two market leaders in the space – Kalshi and Polymarket – have received vast investment to expand their offerings, even as the market-leading sports betting operators launch their own versions of the products.