Hi, I’m Katie Malone, and this is Innovation Wire by Technical.ly. We send this newsletter every two weeks, covering local trends in AI, tech, startups, entrepreneurship and jobs of the future.
If this was forwarded to you, subscribe here.
Today we’re talking about the rise (and attempted regulation) of prediction markets.
Prediction markets may be sold as financial products, but to the states now pressing to regulate them — and, honestly, to many of us — they look a lot like gambling.
Purveyors like Kalshi argue they are offering binary event contracts, not bets. They’re yes-or-no markets on whether some future event will happen. Because these contracts are framed as federally regulated derivatives rather than traditional wagers, they fall under federal oversight instead of the state-by-state gambling regime.
In practice, the difference is less convincing.
Whether users are putting money on the weather, aliens or highly specific geopolitical events, these platforms occupy much the same space as sportsbooks. They invite people to risk money on uncertain outcomes while avoiding the legal and political constraints imposed on traditional gambling.
Several states — including Nevada, Illinois, Michigan and New Jersey, which are home to some of the country’s biggest gaming markets — have launched litigation or enforcement efforts against prediction market operators they say are skirting state laws. The tension also shows up in places where gambling remains illegal, like Utah and Hawaii, because these platforms are still accessible there.
Gambling is a major source of public revenue and regulatory authority. Operators paid a record $15.9 billion in direct gaming taxes to state and local governments in 2024. States regulate betting with licensing, taxation and consumer-protection rules, but prediction markets operate outside that framework, so states lose all three.
Still, if prediction markets keep growing and federal regulators retain control, states may have another path to exerting influence.
That’s because these platforms only work when real-world events can be translated into trusted data like election results, financial benchmarks, regulatory decisions and scientific milestones. That gives leverage to the places and institutions that produce and verify that information.
Finance hubs like NYC could find a stake in the game, feeding results or other partnerships for transactions like how the NASDAQ-100 will be at year’s end. State capitols and DC have a clear advantage on the many, many political bets. University hubs have the research to answer more abstract questions, on topics like nuclear fusion and whether the FDA will approve shrooms for medical use.
And when you can “trade on anything,” the people producing credible information about everything start to matter a lot.
Another angle:
“Financial economics repeatedly shows that when people are willing to stake money on their beliefs, whether about the value of a company or the outcome of an election, these markets tend to produce forecasts that are both disciplined and remarkably accurate.”
What’s your take on prediction markets and their effects? Hit reply and let me know.
Technical.ly headlines of the week
3 things to know
🚫 Banned: Maine’s House passed a bill to pause new data center construction until November 2027 while the state studies grid and environmental impacts. With Senate approval and the governor’s support expected, Maine is poised to become the first state to do so. [WSJ🔒]
💧 Drink up: A water treatment plant in Minot, North Dakota, was hit by ransomware last month — but the hackers never actually asked for cash, just shared a friendly reminder to “tighten up” the firewalls. [KX News]
🚑 What’s your emergency?: Macomb County, Michigan, 911 dispatchers will get some help from AI to transcribe calls and evaluate worker performance. The $41,000 project won’t put AI in charge of answering 911 calls, though, and human dispatchers will remain on the line. [MLive]