CLEVELAND — If you've watched any sporting events lately, like the NHL Playoffs, you've likely seen ads for apps like Kalshi and Polymarket. They are prediction markets that act much the same way sports betting apps do, but allow you to put money on the outcome of so much more, like politics and pop culture.
They are platforms regulated by the Commodity Futures Trading Commission in Washington and not subject to state regulations. So they essentially offer sports betting and more, but don't have to pay Ohio's 20% sports betting tax on their profits.
"They made billions and billions of dollars last year, and they didn't have to pay taxes because they skirt the laws, and as far as I'm concerned, they ought to be like everybody else and pay their fair share," said State Senator Bill DeMora (D-Columbus), who introduced legislation this week to make these markets apply for sports betting licenses and pay Ohio taxes. "I mean, this is something Ohio is losing $200, $300 million in revenue on, and it's gotta stop. They need to pay taxes, and they need to pay the license fee."
DeMora's legislation, though, only applies to the sports side of what these companies do, not to anything else they accept wagers on. Opponents of prediction markets point to the risks and instances of trading on inside information. Just this week, an Army Special Operations Officer was charged when he bet on Polymarket that Nicolás Maduro would be ousted from Venezuela without revealing he took part in the secret mission.
Prosecutors allege he placed 13 bets totaling $34,000 that paid out more than $400,000.
An intelligence firm also found six suspected insiders made more than $1 million betting on the U.S. strike on Iran, some placed just hours before the attack.
This is one of the reasons the Senate unanimously approved a measure introduced by Ohio Senator Bernie Moreno banning any member of the Senate or their staff from using prediction markets.
"Our constituents have to know that our only guiding light is what's best for our state, what's best for the people of our state and what's best for the United States of America," said Moreno on the Senate floor.
The Problem Gambling Network of Ohio points to the potential for problems with prediction markets beyond the range of topics that one could wager on.
"We saw it when sports betting was legalized that it was the greatest expansion Ohio had ever seen and really for the first time brought betting to the palm of your hand 24/7 and as we look at prediction markets there's that much access plus so much more because the age of participation goes from 21 to 18 and that's assuming that they're using appropriate age verification which some reports show they are spotty at best," said Derek Longmeier, executive director.
DeMora said his legislation would require prediction markets, at least for sports betting, to comply with the minimum age requirement of 21.
Industry analyst Ryan Butler, senior news analyst with Covers.com, tells News 5 that if the measure were to pass or another measure that DeMora said he's considering, banning these prediction market companies outright, it will end up in the courts.
"Honestly, if a state-level law like that passes, I think there's a good chance that it doesn't even take effect because it will be waited on until this goes to the U.S. Supreme Court," said Butler. "Every indication and everything...talking to lawyers and all of that is that this is ultimately where this is going to have to be determined: whether or not these are financial trading platforms or if these are really just sportsbooks under a different name."
He continued, "Either way, the Supreme Court ruling is going to be the biggest thing in gambling in a decade; it's amazing either way. Up and until then, this is going to be the biggest story going on in gaming."
