Backing Your Hunches: Industry Expert Alexander Korsager explains the rise of prediction market trading in the USA.

Betting is human nature

The words "I bet" just trip off our tongues. They are part of most people's everyday language and testament to our innately competitive nature and desire to get things right! "I bet" does not imply that money is involved and is often qualified with "I would place good money on it". For centuries (or millennia), humans have enjoyed forecasting the outcomes of future events, be it Roman chariot racing or the results of a Stone-Age hunt. Archaeologists have found evidence that betting took place among hunter-gatherers for items such as essential tools or weapons.

Therefore, it is unsurprising that modern humans have a desire to predict the possible outcomes of real-world events and back that 'hunch' with some money in the hope of winning if they are correct. However, for many Americans, it has been illegal to do so, particularly online, due to complicated state licensing laws. However, the rise of prediction markets is now gamifying everything, and we wanted to know more.

We invited industry expert Alexander Korsager from the independent online review site Casino.org to tell us more about these new kids on the block who have burst onto the scene and are shaking up the online gambling market.

Betmentor.com:

Hi Alexander, thanks for taking the time to come and talk with us. Before we go into the specifics of prediction markets, could you tell us a bit more about yourself and the company you work for?

Alexander Korsager

Thanks for inviting me in. I am the Chief Gaming Officer at Casino.org – an independent online casino review site that has been sorting out the proverbial wheat from the chaff for over three decades. Our job is to help players find their perfect casinos and betting sites by creating expert, data-driven reviews, smart tools, exclusive bonuses, and trusted guides so that our readers can play with confidence.

We're here to help players make smart and safe choices. No shortcuts. Our experienced editors follow a process that's built to be independent, honest, and focused entirely on what's best for the player. Every recommendation we give is earned, not bought. In an industry full of noise, we pride ourselves on being the clear, dependable voice players can rely on.

Betmentor.com

Ok, Alexander, thanks for the comprehensive introduction. So, if your forte is casinos (and the name is a bit of a giveaway), why are you also reviewing prediction market platforms?

Alexander Korsager

Good question, particularly when, strictly speaking, prediction market platforms like Kalshi, Polymarket, and Underdog are not actually betting sites, which is why they are legal across the US. However, in many ways, they behave like gambling sites and attract a similar customer base. They operate in the same space and use similar recruitment tactics as other gambling sites.

For example, new customers can find an Underdog sign up bonus or a Kalshi referral code. How do players know that these are worth it and good value? As we aim to look after players' interests, it made sense for us to review these as we would any other iGaming site.

Betmentor.com:

Oh, yes, that makes sense. However, you said that 'strictly speaking' these prediction platforms are not betting sites and that is what makes them legal. They appear like betting sites, so what are they?

Alexander Korsager

Yes, they look and behave like gambling sites but are federally regulated by the Commodity Futures Trading Commission and classified as financial derivatives. Rather than a sports book setting the odds and punters betting against the bookie, prediction markets are peer-to-peer platforms, and the 'odds' are set by the market.

BetMentor

So, can you back up a hunch on anything, or are there restrictions on the types of events on offer?

Alexander Korsgaer

The criteria for prediction market trades are that they must be based on real-life future events with a binary (YES/NO) outcome. So, as long as they are real-life and not imaginary or fictitious, and as long as another person wants to trade, in theory, you can trade on anything.

However, as the platforms have to originate the market, they dictate what is and is not available to trade. In general, events that can be traded on fall into the broad categories of politics, culture, economics, and sports. The platforms offer thousands of opportunities, but are not as in-depth as specialist sports books – you are less likely to find niche sports events, for example.

BetMentor:

You mentioned event trading in sports. Surely this market is already covered and provisioned at a state level?

Yes and no. Sports betting is regulated at the state level, but not all states allow it. What the prediction markets have done is to allow every citizen (including those in populous states like California and Texas) to back their hunches without actually gambling. It is more than just semantics; the sites are quite different from traditional sportsbooks. They are much more business-like and do not include entertainment features such as streaming or chat.

As you can imagine, some states are unhappy with their development. For regulated online betting markets like those in New York, Pennsylvania, and New Jersey, prediction markets are a direct threat to their lucrative, licensed sports betting operators. For conservative states like Utah, they are a direct threat to their culture.

Betmentor:

How are the traditional iGaming and sportsbook operators viewing this?

I honestly do not think there is much crossover between online casinos and prediction markets. The former is about fun, entertainment, and relaxation, the latter about studying form, taking a position, and watching the markets. While betting on the outcome of a future event can be fun, it is not the same immersive experience as playing online slots or playing a live-dealer game.

However, there is no doubt it could affect the broader gambling market, and we are now seeing familiar names like DraftKings and FanDuel evolving and entering the market. They have both launched Predict variations. DraftKings Predicts acts as a quasi-sports betting site that offers sports events only in states where it cannot operate its traditional sports betting services.

It is fair to say that these online behemoths did not enter these markets by choice – this was a defensive move. However, it has also given them the chance to legally offer services in the states where their gambling sites are illegal. So, it's a win-win situation for them.

Betmentor

Thank you for your valuable insights, Alexander.