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Prediction markets are the latest in a long line of examples of how gambling innovation takes root in the gray areas.
Major prediction markets are embroiled in lawsuits across the country, with some states like Arizona banning some operators altogether. State governments argue that the services are sidestepping necessary gambling licensing laws, while prediction markets maintain they shouldn’t be subject to state-level regulation.
While there are some ways that prediction markets mimic traditional gambling, especially sportsbooks, there are also clearly ways that they are innovating. Traditional gambling operators wouldn’t offer so many entertainment or political bets – if any at all. Local betting shops don’t offer odds on what a tech CEO is going to say in the next all-hands meeting.
These types of off-the-wall bets are attracting a new crowd who wouldn’t typically be betting. Speaking to Sigma, CEO and founder of Yield Sec Ismail Vali noted that those under 30 are the most responsive to prediction markets and their current affairs-style event contracts.
“Under-30s don’t think they’re gambling,” he said. “They genuinely believe they’re predicting. Whatever that means, but it’s not gambling when it absolutely is.”
Gambling innovation has a long history of operating in the legal gray areas
Part of the reason why prediction markets have surged in popularity so quickly, and why they’re getting so much pushback now, is because they operate in the legal gray area.
There is virtually no specific regulation for what prediction markets can offer event contracts on, as they’re currently overseen by the Commodity Futures Trading Commission (CFTC), which treats them as derivatives exchanges. Some market leaders like Kalshi are working proactively with the CFTC to keep up this relationship, rather than move to state-by-state regulation like traditional gambling.

“Prediction markets are a perfect example. They borrow mechanics from futures and options markets, behavioral incentives from gambling, and speech-based framing that resembles polling or forecasting. That hybridity creates regulatory ambiguity, which is where innovation thrives.” – Braden Perry, Kennyhertz Perry, LLC, attorney

Prediction markets may be the current example of gambling innovation springing up just past the line of official regulation, but past examples have included sweepstakes, slot machines, daily fantasy sports games, and a wealth of other once-innovative, now-normalized (and regulated) gambling methods.
“Most gambling laws in the US were written to regulate clearly defined activities: casinos, sportsbooks, lotteries, or regulated derivatives markets,” Braden Perry, a litigation, regulatory, and government investigations attorney with Kennyhertz Perry, LLC, explained to ReadWrite. “Innovation happens when a new product doesn’t fit neatly into any of those boxes.
“Prediction markets are a perfect example. They borrow mechanics from futures and options markets, behavioral incentives from gambling, and speech-based framing that resembles polling or forecasting. That hybridity creates regulatory ambiguity, which is where innovation thrives.”
As Perry goes on to note, this is far from incidental. The developers of prediction markets seemingly skirt regulation to create something new, avoiding being weighed down by regulatory ties.
“Developers tend to design products right up to the edge of existing definitions: avoiding ‘chance’ by emphasizing skill or information, avoiding ‘wagering’ by using contracts or tokens, or avoiding ‘consideration’ through alternative purchase mechanisms,” he stated. “This is not accidental. It’s a direct response to highly prescriptive gambling statutes that leave little room for licensed experimentation.”
Where does regulation need to step in?
Prediction markets are in a lightning-in-a-bottle stage right now. With little specific regulation beyond what applies to derivatives exchanges, the playing field is fairly open for experimentation. That’s both a good thing for consumers in terms of offering a lot of variety, but also exposes both users and third parties to potential risk.
“Regulators are often reactive rather than proactive in this space,” Perry continued. “Agencies typically wait for scale, harm, or public visibility before stepping in, especially when jurisdiction is unclear, such as between gaming regulators, securities regulators, and commodities regulators. That delay effectively becomes a window for experimentation.”
A recent example centers around Coinbase CEO Brian Armstrong, who poked fun at prediction markets in the company’s quarterly earnings call on October 30.

lol this was fun – happened spontaneously when someone on our team dropped a link in the chat https://t.co/tQiV3B9jUj
— Brian Armstrong (@brian_armstrong) October 31, 2025

“I was a little distracted because I was tracking the prediction market about what Coinbase will say on their next earnings call,” Armstrong said in his parting remarks, as reported by Bloomberg. “I just want to add here the words Bitcoin, Ethereum, blockchain, staking, and Web3, to make sure we get those in before the end of the call.”
While naturally just being a lighthearted comment, his comment shows just how easily he could manipulate such event contracts. If Armstrong put money on him saying that string of words, he can then easily fulfil said event contract. Make the words something even more random, raise the odds, and he could make even more off the back of it.
There’s no real regulatory framework to prevent anyone from doing this currently, highlighting how such rules are not just prohibitory but also protective for everyone involved. In time, organizations will need to catch up, whether that’s on a state or federal level.
“Historically, this is how many now-regulated products began: daily fantasy sports, online poker, esports wagering, and even early financial derivatives,” Perry said. “Grey areas aren’t a bug in gambling regulation; they’re a structural feature of how innovation tests outdated legal frameworks.”
Featured image: Midjourney
The post Life in the gray: why gambling innovation stems from unregulated areas appeared first on ReadWrite.

The Kinston Police Department announced that its Violent Crime Action Team has concluded a months-long investigation into what authorities described as an illegal online gambling operation conducted through Facebook.
According to a statement posted by the department, detectives took 51-year-old Quarla Blackwell into custody at her residence in North Carolina on Tuesday (December 23) without incident. Police said Blackwell faces four counts of money laundering and two counts of gambling. The department added that the investigation remains ongoing and that additional charges are possible.
In a separate social media post, an account claiming to belong to Blackwell shared a video Tuesday showing police vehicles pulling up in front of a residence where she was present. The same account later stated that she had spent two days in jail. In a written post, she said, “As long as I’ve been playing on these fish tables now it’s a crime.” Fish table games are a type of casino game, where players take control of a cannon, aim, shoot, and try to catch as many fish as possible.
Police vehicles are seen outside a residence in Kinston during an investigation announced by authorities. Credit: Quarla Blackwell / Facebook
Police have not commented on the video or the statements attributed to Blackwell. Authorities stressed that the charges are allegations and that the case will proceed through the court system. Blackwell is presumed innocent unless and until proven guilty in a court of law.
Former city council candidate faces gambling charges in Kinston Facebook probe
According to Gambling America, Blackwell is a former city council candidate and well-known community activist. She has faced legal scrutiny before. In September, she was charged with perjury in connection with disclosures filed during her run for Kinston’s at-large city council seat. Warrants allege she reported that her rights had been restored as of 2025, when police say they were not scheduled to be restored until 2028.
Blackwell later filed an election protest seeking a new vote, saying she had evidence of irregularities. The State Board of Elections reviewed her claims last week during a meeting in Raleigh and denied the request.
Featured image: Kinston Police Department via Facebook
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A finance director who swindled a business based in Birkenhead, England, out of nearly £1.9 million ($2.4 million) has been sentenced to prison after his “predilection for gambling got out of hand.”
Allan Wood, 59, from Saltersgate in Ellesmere Port, appeared at Liverpool Crown Court on Tuesday (December 23) after admitting to four counts of fraud by abuse of position linked to his role at Cammell Laird.
The case first came to light in January 2021, when the allegations were reported to Merseyside Police, triggering an investigation by their Economic Crime Team.
As detectives dug into the company’s finances, they uncovered the scale of the fraud. Over more than a decade, Wood siphoned off an eye-watering amount of money from his employer.
Finance director Allan Wood moved money into accounts for gambling and personal spending
Between 2007 and 2008 alone, he dishonestly redirected company funds for his own benefit, moving more than £1.5 million ($2 million) into personal accounts and using company money to pay off his personal credit card bills.
On top of that, Wood signed off on more than £315,000 ($426,000) in what was described as “unauthorised corporate entertainment,” spending company cash on himself, friends, and family. This included charging the firm for tickets to the Champions League final and football season tickets. According to the Liverpool Echo, when questioned later, he even came up with a far-fetched claim that the spending was connected to suspected spying within the company.
Altogether, his actions left Cammell Laird out of pocket by £1,870,243.
At the time the fraud was taking place, the company was already under serious financial pressure. Board members had to put in large sums of their own money just to keep things afloat, while staff faced the very real threat of layoffs and strike action.
Wood was sentenced to five years and three months in prison.
Detective Constable Laura Madden, who led the investigation, said: “This fraud placed a business under significant financial pressure, causing distress and worry to all employees. Let’s not also forget the impact it would have had on their families as many feared for their jobs.
“This impact was clearly lost on Wood and he will now be left to consider the full consequences of his actions while he serves time in prison.
“Fraud can and does devastate individuals and businesses, and thankfully Wood has now been prevented from causing any more harm.”
Featured image: Merseyside Police
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The Chicago Blackhawks have announced a new partnership with Kalshi, making history in the process. This is the first time an NHL team and any professional sports team in North America has teamed up with a federally regulated prediction market platform.
The deal, announced Tuesday (December 23), kicks off this week. It includes shared use of logos and trademarks for co marketing, collaborations on social media, and Kalshi signage inside the United Center and during Blackhawks game broadcasts across the Chicago area. Illinois is already one of Kalshi’s top ten markets.

We’re excited to be the official prediction market partner of the Chicago Blackhawks for their Centennial season
The @NHLBlackhawks make history as the first pro sports team to partner with a prediction market
A partnership first with one of the largest fanbases in sports pic.twitter.com/jTQQkBuhsS
— Kalshi (@Kalshi) December 23, 2025

Kalshi’s platform allows users to trade on the outcomes of real world events, including elections, economic indicators, and cultural trends. The company says these markets are designed to help forecast events with real economic and social impact.
The partnership follows Kalshi’s October agreement with the National Hockey League, which gave the company access to official NHL data along with the right to use league logos and branding. The deal marked the first time a major US sports league licensed its data and marks to a company that identifies as a financial exchange rather than a gambling operator.
However, the distinction has sparked criticism from the Indian Gaming Association and tribal leaders nationwide. They argue that prediction markets tied to sports outcomes raise legal and regulatory concerns similar to sports betting, an area where tribal governments have long held rights and compacts.
The Blackhawks are one of the NHL’s Original Six franchises and were founded in 1926. The team is currently celebrating its Centennial season, which will conclude with its official 100th anniversary game in November 2026. Over the years, the Blackhawks have also been associated with several innovations in hockey, including the original goal horn and the curved stick.
Kalshi partnership with the Blackhawks to add ‘value to their fan experience’
“We’re proud to share an innovative mindset with Kalshi,” said Blackhawks Executive Vice President of Revenue and Strategy Matt Gray. “Prediction markets are changing how fans interact with sports – moving from passive viewing to informed, engaged participation – and we’re excited to explore that with our fans during this Centennial season.”
Kalshi Head of Sports Partnerships Adam Barrick said the company views the partnership as part of a broader expansion strategy. “The Blackhawks have a fanbase like no other,” Barrick said. “We’re looking forward to adding value to their fan experience as we continue to expand across sports, media, and entertainment.”
Featured image: Kalshi / Chicago Blackhawks
The post Blackhawks make history with Kalshi partnership, first pro sports prediction deal appeared first on ReadWrite.