As the Super Bowl approaches, New York Attorney General Letitia James has issued a stern warning to consumers about the risks associated with prediction markets. These online platforms, which allow users to trade on event outcomes such as sports results or political events, are unregulated in New York. James emphasized that these markets do not offer the same consumer protections as regulated gambling platforms and urged residents to exercise caution when engaging with them.

“New Yorkers need to know the significant risks with unregulated prediction markets,” James stated in an official press release release. “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.”

Financial and Consumer Protection Risks

Prediction markets such as Kalshi and Polymarket are gaining significant traction, particularly during major events like the Super Bowl. These platforms offer trades on outcomes, similar to traditional sportsbooks, but James clarified that these contracts are often classified as bets masquerading as “event contracts.” She pointed out that they operate without oversight from the New York Gaming Commission, leaving consumers vulnerable to financial loss.

The lack of regulatory oversight is a significant concern for AG James. She warned that prediction markets lack essential safeguards, including measures to prevent underage gambling, address problem gambling, and enforce responsible advertising. Regulated gambling platforms are required to implement protocols to protect consumers, such as ensuring financial stability, offering self-exclusion tools, and preventing insider betting.

Unlike licensed operators, these prediction market platforms are not required to provide the same consumer protections, which could lead to harmful consequences for users. James also noted reports from the financial industry highlighting the increasing risks of overextension of credit and rising loan defaults associated with these platforms.

The legality of prediction markets has become a contentious issue, with state regulators arguing that these platforms are operating illegally under state gambling laws. However, prediction market companies like Kalshi assert that they are federally regulated by the Commodity Futures Trading Commission (CFTC) and not subject to state jurisdiction. This dispute has led to ongoing legal battles, with state authorities pushing for tighter regulations, while the CFTC defends its exclusive oversight of the market.

In her statement, James emphasized that prediction markets should be treated as high-risk ventures. “Treat these prediction markets as high-risk — no guarantee of returns, and no guarantee of access to your funds,” she warned.

Growing Concerns and Legal Developments

The growing popularity of prediction markets, especially during high-profile events like the Super Bowl, has prompted legal and regulatory scrutiny. While platforms such as Kalshi and Polymarket operate across all 50 states, including those where sports betting remains illegal, they face mounting pressure to comply with state-specific gambling laws.

At the same time, legislation to regulate prediction markets is making its way through New York’s state assembly. One proposed bill seeks to restrict certain event contracts, including sports-related bets, while another would require platforms to obtain a license from the Department of Financial Services.

Despite these legislative efforts, the issue remains unresolved. As James noted, consumers should proceed with caution when using these platforms, as the lack of regulation and consumer protection presents significant risks.

As prediction markets continue to grow in popularity, AG James’s warning serves as a reminder of the importance of consumer protection in the evolving gambling landscape. She urged New Yorkers to verify whether a platform is licensed by the New York Gaming Commission before engaging in any betting activity. James’s message is clear: without proper regulation, these platforms pose a considerable financial risk to users.