Global lottery associations are ramping up their efforts against prediction markets, arguing that these contentious online platforms facilitate gambling disguised as financial trading.
The North American Association of State and Provincial Lotteries (NASPL) has publicly criticized regulators for permitting prediction markets to conduct trading related to sports. The NASPL, which includes 50 lottery entities primarily from the United States, claims the Commodity Futures Trading Commission (CFTC) has implicitly endorsed illegal gambling within these markets.
“Predictions necessitate an event or circumstance anticipated to occur in the future. Even though a participant might assert a skill component in crafting their ‘prediction,’ the dominant elements of chance associated with that prediction categorize it as a ‘wager,’ qualifying it as a likely illegal gamble,” stated NASPL in its communication regarding prediction markets.
“Traditionally, ‘gambling’ refers to the act of wagering money or another form of consideration for a random opportunity to win a prize. Even with some skills involved in the decision-making process, the significant role of chance in determining outcomes renders the activity a gamble,” NASPL further elaborated.
Risks to Lotteries and Their Advantages
The NASPL expressed its concurrence with the May position paper from the World Lottery Association (WLA), which voiced concerns that financial trading exchanges threaten the lottery industry and the various initiatives they fund.
Alongside the WLA, the NASPL is advocating for “immediate regulatory clarification” across all areas where prediction markets host sports trading. The focus of lottery organizations is not limited to sports; they are also addressing prediction market event contracts related to political outcomes.
“Should a product provide a financial return that hinges on the result of an event—whether sporting, political, or otherwise—it qualifies as a wager or bet. Hence, it requires appropriate licensing and regulation, regardless of the operator’s preferred designation,” the WLA conveyed in May.
The NASPL emphasizes that most of its member lotteries were developed through public policy initiatives aimed at generating essential revenue for educational services, college scholarships, community grants, property tax alleviation, and senior programs. In contrast, prediction markets do not remit state taxes on their earnings, nor do they incur substantial licensing fees.
“Operators of prediction markets that evade these responsibilities gain an unfair structural advantage derived from regulatory circumvention rather than superior product quality or authentic innovation. This distortion not only impacts individual licensed operators but also jeopardizes public funding essential for a sustainable and viable regulated gaming environment,” the WLA outlined.
The Edge of Lotteries
The NASPL contends that its member lotteries deliver unrivaled public benefits compared to other legal gambling forms.
“Lotteries stand as the most impactful gaming endeavor, emerging from the public policy process that governs our operations, beneficiaries, and sanctioned competitors. NASPL members are poised to be a valuable resource in navigating and addressing the challenges posed by prediction markets,” the statement concluded.