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The Capitol Forum recently published an article examining the difficulties Sporttrade has faced trying to operate an exchange-style sports prediction platform under existing state gambling laws.
Sporttrade was created to allow users to buy and sell contracts on the outcomes of sporting events, similar to how traders interact on financial exchanges. But bringing that model into the highly regulated U.S. sports betting market has proven difficult.
The company spent years working with state regulators and pursuing licenses across the country. After significant lobbying and compliance costs, it ultimately secured approval in only five states and operates a much more limited version of its original concept.
Because of its limited market access, the company today is struggling to scale its peer-to-peer sports betting exchange due to a mismatch with traditional, state-by-state gambling regulations.
High compliance costs, limited liquidity, and restrictions on using third-party brokers have served to further hindered growth, forcing the company to seek alternative regulatory paths.
The article also highlights the growing tension between state gambling regulators and federally regulated prediction markets like Kalshi, which have taken a different approach by seeking oversight through the Commodity Futures Trading Commission.
Sporttrade’s struggles illustrate how state sportsbook frameworks are designed for house-based betting, making it difficult for exchange or prediction-market models to operate within those laws.
Renowned gambling attorney, I Nelson Rose, was quoted in the article discussing the difficulty new competitors face entering a sports betting market already dominated by large operators.
Rose has repeatedly argued that the financial framing does not change the underlying activity.
“The idea that it’s a market doesn’t make it any less gambling.”.
Rose has further asserted that these prediction platforms are “clearly a form of gambling… simply with an inventive mechanism to work around gambling laws.”
The CEO of Kalshi, Tarek Mansour, has repeatedly argued that Kalshi is not gambling, even though users risk money on event outcomes. His main defense is that Kalshi functions as a financial exchange for event contracts, not a sportsbook.
“You’re basically calling the entire financial market gambling," he said.
- Aaron Goldstein, Gambling911.com
