Lottery bodies seek gambling oversight for prediction markets
The North American Association of State and Provincial Lotteries (NASPL) and the World Lottery Association (WLA) have called on governments to regulate prediction markets under gambling laws rather than financial regulations.
These associations have observed that event-based markets increasingly resemble gambling products, posing a risk to regulated sports gambling markets and public lottery funds.
The groups also cautioned that prediction markets might evolve into lottery and casino-style products, boosting competition with authorised lottery operators and triggering calls for greater regulatory oversight.
Why lottery associations are raising the alarm
Lottery officials are becoming more concerned about prediction markets. The NASPL claims that these sites behave like gambling, without adhering to the same laws as regulated operators.
The notice issued by NASPL raises the problem of regulatory inconsistency. NASPL does not oppose new innovations; rather, it emphasises that they must take place in a legal setting that protects consumers while also promoting competition. The organisation argued that this violates decades of gambling legislation aimed at reducing problem gambling, fraud, and ensuring sports integrity.
The NASPL leaned heavily on the World Lottery Association’s position paper titled “Prediction Markets: Unlicensed Betting by Another Name – Threats to Sports Integrity, Consumer Protection, and the Lottery and Betting Sector.” That paper makes a clear case: prediction markets should be regulated in the same way as state-approved gambling products, regardless of how operators or even the Commodity Futures Trading Commission (CFTC) classify them.
WLA’s position
The WLA made similar points in its report “Prediction Markets: Unlicensed Gambling by Another Name.” The organisation contends that financial regulation and gambling regulation are not interchangeable because they have different regulatory objectives: stability and transparency in the former, consumer protection in the latter.
WLA stated, “A predictable objection from the U.S. CFTC-authorised prediction market operators is that they are already regulated. This paper addresses that argument directly: authorisation under a financial or derivatives framework is not equivalent to a gambling licence.”
Functional test proposal
The NASPL and WLA recommendations offer a functional test in which products are regulated based on their function rather than their label. Gambling, whether referred to as an event contract, prediction market, or derivative, is any activity in which money is wagered on uncertain events for monetary gain.
WLA further added, “Where a jurisdiction chooses to classify such offerings as financial products, it should nonetheless require the application of safeguards and constraints equivalent to those applicable to gambling, given the comparable consumer-protection, integrity and harm-prevention risks involved.”
Risks highlighted by lottery organisations
Lottery organisations say their concerns extend far beyond simple competitiveness. What concerns them most are broader issues such as protecting consumers, preserving the integrity of sports, preventing financial crime, ensuring tax collection, protecting public funds, and maintaining regulatory consistency. As prediction markets expand into sports betting and lottery-style contracts, regulators are concerned that crucial safeguards may weaken or become significantly different from one jurisdiction to the next.
Consumer protection is an extremely significant issue. Licensed gambling operators must provide responsible gambling tools such as deposit limits, self-exclusion, affordability checks, reality checks, advertising restrictions, and intervention options. Lottery officials ask whether regulated financial markets that use prediction provide comparable consumer protection measures.
Sports integrity is another concern. Betting operators use monitoring technologies to detect suspicious activity associated with match-fixing, insider betting, or corruption, and they work with sports organisations, regulators, and law enforcement. Lottery groups say that prediction markets offering sports contracts should be subject to the same integrity regulations.
WLA concluded, “We call upon all stakeholders to act with the urgency this situation demands. The protection of consumers and the integrity of sport are not negotiable.”
NASPL suggested, “The result of failing to establish appropriate regulatory parameters will hurt the integrity of the very games (sports as well as lottery) that prediction markets target, compromise consumer protection and responsible gaming efforts nationwide, undermine public benefit funding efforts, and compound the challenges law enforcement faces in combating tax evasion, money laundering and racketeering. The same gaps in the legal and regulatory infrastructure that allow this type of activity also make it difficult to identify, correct and prevent harmful ulterior motives from being enacted by bad actors.”
Lottery associations also advocated geoblocking, punishment for illicit activities, and regulatory cooperation. In the absence of such safeguards, organizations may exploit any loopholes for noncompliance.
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