(AsiaGameHub) –   The Pennsylvania Gaming Control Board (PGCB) has issued a warning to federal regulators, cautioning that the rapid expansion of prediction markets could undermine years of careful gambling oversight. In a sharply worded memo, the PGCB criticized the Commodity Futures Trading Commission (CFTC) for allowing platforms offering event-based contracts to operate as unregulated sportsbooks.

State Regulators Warn That Prediction Platforms Lack Critical Protections

The letter represents another sign that state gaming authorities are preparing for a prolonged fight over the future of prediction platforms. Their central argument centers on whether prediction markets are financial tools or a new form of gambling. The CFTC has long treated platforms like Kalshi as part of the derivatives ecosystem, placing them under federal oversight.

However, Pennsylvania regulators see little difference between those contracts and traditional wagers. The memo cites an official statement dating to the aftermath of the 2008 financial crisis, when lawmakers warned against using derivatives markets to bet on public events. According to the PGCB, several critical guardrails are now being ignored.

The CFTC is simply not built to adequately monitor retail transactions valued at $100 or less and entered into by a teenager.

PGCB memo

The state regulator notes that licensed sportsbooks must follow strict regulations. Such platforms have a minimum age of 21 and must perform extensive monitoring for suspicious activity. Prediction markets, by contrast, often allow participation at 18 and lack the same level of oversight. The PGCB argues that prediction markets operate like sportsbooks without the legal protections afforded by state laws.

The CFTC Is Unlikely to Change Its Stance

Integrity concerns were another contentious topic. The PGCB drew attention to recent allegations of trading tied to geopolitical events and sports outcomes, including questions about insider knowledge and market manipulation. Pennsylvania’s regulated system manages such risks by collaborating with other state authorities. No such structures oversee federally overseen prediction platforms.

Even if the CFTC can authorize these markets, it is not necessarily in the best interest of the citizens to do so.

PGCB memo

The PGCB’s executive director, Kevin O’Toole, previously described the issue as the emergence of a “dual-track” system: one tightly regulated by states, the other operating under federal authority with fewer restrictions on access and participation. These concerns are especially relevant as prediction markets now attract millions of users, drawing the attention of regulators and policymakers.

Despite rising controversy, the CFTC has maintained its current position. The conflict has also spilled into courts, as several states have formally challenged prediction platforms such as Kalshi and Polymarket. With different rulings being almost inevitable, it could be up to the US Supreme Court to deliver a final verdict.