The future of prediction markets in the state of Hawaii is looking precarious after lawmaker Josh Green added his name to the list of elected officials who are lobbying for the practice to be outlawed.
House Bill 2198 is seeking to define prediction markets and trading platforms that provide sports event contracts as illegal betting.
Lawmakers suggest prediction markets skirt state’s gambling laws
Hawaii and Utah are the only two states in the U.S. with outright bans on gambling, and one of the authors of the bill, Scot Matayoshi, says it is a “really interesting loophole they have found.”
Matayoshi is one of the chairs of the House Consumer Protection & Commerce Committee, and added: “It’s pretty sketchy. In prediction markets, you have to find someone else to take your bet on the other side, otherwise it doesn’t go through. In Hawaii, they’re using this platform because it’s technically legal right now.”
According to the text in the bill, the “purchase, sale, or financial speculation of securities or commodities on the outcome or future contingent events related to sports, contests, people, politics, catastrophe, and death.”
There has been some discussion among lawmakers about altering the definition of gambling within state law in an effort to get the bill over the line. If it were to pass the state’s House Of Representatives, it would go into effect from July 1.
Hawaii latest state to take action against prediction markets
The Aloha State joins several other U.S. states taking action against the practice. Kalshi and Polymaklet, two of the biggest names in the prediction market, are in the crosshairs of 19 federal lawsuits at the time of writing.
In Nevada, regulators moved early, issuing cease-and-desist orders on the grounds that sports-related event contracts amount to unlicensed wagering under state law.
New Jersey has taken a similar stance, arguing that prediction markets tied to sporting outcomes undermine the state’s tightly regulated sports betting framework. Illinois regulators, meanwhile, have focused on consumer protection concerns, questioning whether event contracts expose retail traders to gambling-style risks without the safeguards required of licensed sportsbooks.
Critics of the industry argue that, when these platforms allow users to wager money on sports outcomes without state licensing, states effectively lose out on tax revenue they would otherwise collect from licensed sportsbooks. With sports betting taxes now funding public services like education, addiction treatment, and infrastructure, states have a growing incentive to bring every form of legalized wagering under their tax umbrellas.
New CFTC chair stands with prediction markets
The new chair of the Commodity Futures Trading Commission (CFTC), Michael Selig,has other ideas, however. Posting on social media site X last month, he said: “Prediction markets have exploded in popularity as participants seek to hedge risks and test their abilities to forecast truth.”
He added in a Washington Post column: “To achieve the golden age of American financial markets, as the president might call it, regulators must break with the rigid and restrictive regulatory practices of the past.
“The CFTC will seize this generational opportunity to modernize and future-proof its approach to regulation and ensure that the great innovations of today and tomorrow are made in America.”
A nominee of President Donald Trump, Selig previously held senior regulatory positions at the Securities and Exchange Commission (SEC), where he advised on digital assets, before moving into private practice focused on financial markets and derivatives.
New York citizens warned against prediction markets
Just days before Super Bowl LX, New York Attorney General Letitia James warned consumers about the risks posed by prediction markets, arguing they lack basic safeguards.
In a consumer alert, James said event-contract platforms operate outside the oversight of the New York State Gaming Commission and do not offer the protections required of licensed sportsbooks. While prediction markets are federally regulated by the CFTC, she stressed that state consumer protections do not apply.
With the Super Bowl set to be the most wagered-on event of the year, James cautioned that prediction markets are increasingly blurring the line with sports betting.
New York, which consistently posts the largest sports betting handle in the U.S., generates hundreds of millions in tax revenue from regulated wagering. James warned that platforms advertising sports-style markets could face civil or criminal action under state gaming laws.
New York is already locked in a legal battle with Kalshi after regulators issued a cease-and-desist order last October, alleging the company offered unlicensed sports betting. Kalshi has countered by pointing to its federal regulatory status, a defense it has raised in multiple states. That argument suffered a setback after Massachusetts courts granted a preliminary injunction against the firm, a ruling New York regulators have since cited in their own case.
