How prediction markets work, explained for the gambling industry rather than for traders. The course covers what an event contract is and why its price is a probability, how an exchange forms prices and earns fees without a house margin, the legal argument between federal derivatives law and state gambling law that is deciding who may offer contracts on sport, the integrity risks of resolution, manipulation and insider trading, a side-by-side comparison with a licensed sportsbook on price, limits, age, geography, tax and consumer protection, the distribution layer of brokerages, sportsbooks, leagues and media that carried the product to scale, and a decision framework for operators, exchanges, suppliers, regulators and investors.
Written for sportsbook and casino operators deciding whether to own, partner or abstain, for suppliers and affiliates whose licences are exposed by the answer, for regulators deciding what to protect, and for anyone who needs to explain the product to a board. It assumes you know how a sportsbook prices and settles.
The through-line is a question the course keeps open: is an event contract on a game a bet? The exchanges say no and hold a federal designation; the states say yes and hold the definition of gambling. The course teaches the argument and how to plan for both answers, rather than picking one.
What a Prediction Market Is
15 min
How Prices Form and Who Provides Liquidity
16 min
The Legal Question: Federal Derivatives Law Versus State Gambling Law
17 min
Resolution, Integrity and Manipulation
16 min
Exchange Versus Sportsbook: What the Customer Is Choosing
16 min
Distribution: Brokerages, Sportsbooks, Leagues and Media
16 min
What to Do About It: A Framework by Role
16 min
Coinbase has told investors that prediction markets are one of the fastest growing products in its history, with annualised revenue above $200 million in the third quarter. It says it is building its own clearing for the product, and its results say nothing about the states pressing it over sports contracts.
Spain's gambling regulator used a cryptocurrency conference to restate that a prediction market offering gambling needs a Spanish licence. It gave no update on the case opened against Polymarket and Kalshi in May, which the ministry expected to take three to four months.
Kalshi has almost doubled its valuation in under six months with a $1 billion Series G co-led by Wellington and Sequoia. The round was announced a day after Utah filed felony charges against the exchange and both co-founders, and the company's pitch to investors leans on its business beyond sport.