Trump administration sues three states over attempts to regulate prediction markets
STEVE INSKEEP, HOST:
The Trump administration is suing three states over their regulation of prediction markets. The administration says only the federal government can make the rules for those sites. People bet on sports, elections, the word choices of the president - even war. Illinois, Connecticut and Arizona have tried to treat the sites like gambling businesses. As you might predict, we've reached out to NPR's Bobby Allyn to talk about this. Bobby, good morning.
BOBBY ALLYN, BYLINE: Hey, Steve.
INSKEEP: What does the federal government say about regulating these sites?
ALLYN: Well, in these lawsuits, they are asking judges to declare that the federal government, specifically the Commodities Futures Trading Commission, should oversee prediction markets - sites like Kalshi and Polymarket. They've exploded in growth in Trump's second term. On these sites, you put money down on yes-or-no wagers, as you mentioned, on everything from, you know, who will win the NCAA championship, say, the outcome of a Senate race, to when exactly Israel will drop bombs on Iran. People are betting billions of dollars a week on these sites, and states have tried to rein them in by forcing them to get licenses as gambling businesses.
INSKEEP: You just said people are betting billions of dollars. How is this any different from gambling?
ALLYN: This is precisely the point states are making. Trump officials and the companies, though, say the apps are technically something more exotic - something known as a futures contract - and maintaining this status means fewer rules and regulations on the industry. I called up Todd Phillips about these lawsuits. He studies financial regulation at Georgia State University. And he says it's common to see the federal government file, you know, amicus briefs, friends-of-the-court briefs about its view on regulations. But what we're seeing here - actually filing lawsuits - is unusual.
TODD PHILLIPS: This really is not just telling the court what their views are, but trying to put a thumb on the scale of the prediction markets.
INSKEEP: OK. How are states responding to that?
ALLYN: Yeah. States are coming out swinging. For them, it's not just who is the cop on the beat keeping an eye on Kalshi and Polymarket. But it's about hundreds of millions of dollars in tax revenue that casinos and sportsbooks pay to a state like Illinois, for instance. The state's governor, JB Pritzker, said in a statement that the Trump administration is, quote, "carrying water for companies driving well-documented and lucrative insider trading schemes," saying the Trump administration is putting profits over consumers.
INSKEEP: OK. Now, I realize this is not the only case where the Trump administration is urging federal regulation or nonregulation versus state regulation. They're doing something similar with artificial intelligence, or trying to. But what is the administration's interest specifically in prediction markets?
ALLYN: Well, the White House and the Trump family love prediction markets. The sites called the 2024 election for Trump before any polls or media outlets. Donald Trump Jr., the president's son, has invested in Polymarket and is an adviser to it and Kalshi. And look, Steve. Anonymous betters, it's been very well publicized now, have made hundreds of thousands of dollars on events like the arrest of Venezuelan leader Nicolás Maduro, the killing of Iran's supreme leader. No public evidence has ever come to light tying any of those to the White House specifically. When it comes to consumer protection, though, there would be more guardrails in place if these sites were treated as gambling apps. But Trump officials and Kalshi and Polymarket insist the apps are financial instruments that should be treated differently.
INSKEEP: What do you predict is coming next?
ALLYN: Yes. Well, these and other lawsuits may eventually reach the Supreme Court.
INSKEEP: Put your money on it. NPR's Bobby Allyn, thanks so much.
ALLYN: You bet.
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