OLD ENOUGH TO BET: HOW DIFFERING CLASSIFICATIONS IN SPORTS BETTING REVEALS A REGULATIONS LOOPHOLE

Introduction 

The sports industry is no stranger to legal analysis, particularly in recent years. Professional and amateur sports teams have undergone significant changes that raise complex legal questions involving athlete compensation, league administration, and intellectual property. One of the more complex legal issues, however, lies outside sports organizations themselves, at the intersection of legislation and corporate activity. Sports betting and its many variations, including sports prediction markets, have exposed flaws in current United States gambling regulations and have opened the door to disparities in consumer protection. 

This article examines the legal distinction between sports betting and sports prediction markets, focusing on the implications of differing age regulations between the two and how those differences expose a loophole in existing regulatory frameworks. This disparity undermines responsible gaming policies and challenges legislatures to reconsider how consumer protection should apply to emerging, financialized wagering products. 

Differing Classification of Sports Gambling and Sports Prediction Markets 

Age regulation discrepancies between sports betting and sports prediction markets stem from the differing legal classifications of these activities. Under federal law, sports betting is a form of gambling that relies on the traditional method of placing a bet “against the house". Sports betting involves placing a wager with a sportsbook on the outcome of a sporting event, with the bettor standing to gain or lose money based solely on that outcome. States typically require sports books to obtain licenses, submit to ongoing audits, implement responsible gaming programs, and comply with strict advertising rules.

After the Supreme Court’s decision in Murphy v. National Collegiate Athletic Ass’n, 584 U.S. 453 (2018), states gained authority to regulate sports betting individually, including consumer protection measures and age restrictions. Most states set the minimum age for sports gambling at twenty-one, with a minority permitting participation at eighteen. As a result, major sportsbooks such as FanDuel and DraftKings require users to be twenty-one to comply with state gambling laws which they are subject to.

By contrast, sports prediction markets have emerged as a new method for consumers to exchange money based on the outcomes of sporting events through peer-to-peer contract trading. These platforms allow users to buy and sell event-based contracts whose value fluctuates based on market predictions rather than wagers placed against a bookmaker. Because these contracts resemble derivatives or futures, they are classified as financial instruments rather than traditional gambling. Courts have recognized that financial instruments are regulated by the Commodity Futures Trading Commission (“CFTC”) under federal jurisdiction and are generally preempted from state gambling laws. As a result, sports prediction markets that operate through contract trading are regulated by the CFTC under the Commodity Exchange Act and not by state law. 

Age Regulation Disparities and Federal Oversight 

Since sports prediction markets are classified as financial instruments rather than gambling, they are not subject to state gambling age requirements. The CFTC does not impose explicit age restrictions specific to sports prediction markets and instead relies on general federal principles governing contractual capacity. Under U.S. law, individuals eighteen years of age and over have the legal capacity to enter into binding contracts.

Accordingly, prediction market platforms commonly permit participation by users eighteen and older. Companies such as Kalshi and Polymarket rely on their classification as federally regulated contract markets to justify this age threshold. The company's regulatory structure mirrors that used for securities and commodities trading, where eighteen is the standard minimum age for independent participation. 

The divergence between state gambling age limits and federally regulated prediction markets has created direct conflict in states where gambling participation is restricted to those twenty-one and 

older. States argue that this discrepancy undermines the policy goals of gambling regulation, particularly consumer protection and youth harm prevention. 

Legislative and State Response 

State legislatures justify twenty-one and older gambling age limits not as mere formalities but as core consumer protection measures grounded in public health research on addiction and adolescent risk behavior. States increasingly argue that sports prediction markets resemble sports betting more than traditional financial instruments. Unlike stock or commodity trading, sports-based contracts are primarily motivated by entertainment and fandom rather than financial hedging or investment utility. Courts have acknowledged that regulatory classification may consider economic reality over formal labels.

Tennessee has taken a leading role in challenging prediction market platforms. The Tennessee Sports Wagering Council issued cease-and-desist letters to companies including Kalshi and Polymarket, alleging that their sports event contracts constitute unlicensed sports wagering in violation of Tennessee law. Tennessee regulators argue that these contracts are “functionally equivalent” to sports wagers and therefore subject to state gambling law that prohibits gambling under twenty-one years old.

In response, Kalshi filed suit seeking injunctive relief, arguing that its contracts fall under exclusive federal jurisdiction through the CFTC and are preempted from state regulation. The federal court’s temporary injunction blocking from shutting down sports prediction market operations marks a momentary win for Kalshi and highlights the unresolved tension between state gambling authority and federal commodities regulation. The results of these state and corporate entity battles in court will create valuable precedent for how sports prediction markets operate going forward and who they are beholden to. A win for state governments would allow them to hold sports prediction markets to the gambling regulations of their state. It would also force companies to reevaluate their company models and advertising efforts on a state by state basis to comply with age regulations and consumer protections. 

Consumer Protection Implications 

Age restrictions in gambling law are designed to protect consumers through safeguards such as identity verification, marketing restrictions, and addiction prevention programs. From a societal standpoint, these consumer protections are put in place to reduce potential gambling addiction and poor financial investment. A central concern is that consumers, particularly younger users, may be misled into believing that sports prediction markets are legal substitutes for sports betting in jurisdictions where traditional gambling is restricted, potentially leading to a rise in gambling in the younger age demographic. This leaves them exposed to the negative pitfalls of gambling without consumer protection regulations in place through this age limit loophole. 

Courts have recognized that misleading representations regarding legality and regulatory status can constitute consumer deception. Several states, including Connecticut, have alleged that prediction market platforms advertise themselves as lawful alternatives to sports betting while effectively offering unlicensed gambling services to underage users. Sports prediction market companies have to be careful on how they market themselves to consumers, as posing as legal sports betting strengthens states' arguments for regulations to apply to these companies as they share more similarities with gambling than financial contracts. Additionally, sports prediction market advertising practices undermine the purpose of state gambling regulations and raise significant consumer protection concerns, particularly when platforms emphasize lower age requirements as a marketing advantage. 

Looking Toward the Future 

Pending litigation will significantly shape the regulatory landscape for sports prediction markets. If states prevail, prediction market platforms may be required to comply with state gambling laws, including higher age limits, advertising restrictions, and responsible gaming obligations. Conversely, a ruling favoring prediction market operators could solidify a nationwide regulatory gap, allowing sports-based wagering products to operate outside traditional gambling frameworks. At its core, this is a restructuring of consumer protection regulations and how state and federal policy concerns can reinvent themselves to match the modern framework of sports betting. 

These regulatory outcomes will also affect professional and amateur sports organizations and their relationships with fans. As teams increasingly partner with wagering-related companies, heightened regulation may limit sponsorships and marketing strategies directed at younger audiences. Courts and legislatures will be forced to balance fan engagement, commercial interests, and the protection of vulnerable consumers. Additionally, in a post Name, Image, Likeness (NIL) era amateur and collegiate sports will have to navigate a world in which fans profit based on performance of non-professional athletes. In states where the age requirement is twenty-one for sports gambling, sports prediction markets offer a way for eighteen and older consumers to bet on their favorite players. In some cases this means college students betting on their peers and fellow students in collegiate sports for younger consumers. This highlights another pitfall of the age disparities presented between sports gambling and sports prediction markets, one that legislators will need to consider when deciding what is best to protect both consumers and athletes. 

Conclusion 

Sports prediction markets expose a significant gap in existing legal frameworks due to their classification as financial instruments rather than gambling. This distinction has resulted in disparate age requirements that challenge the consumer protection goals underlying state gambling laws. Ongoing litigation between states and prediction market companies will play a critical role in determining whether these platforms are subject to traditional gambling regulation or continue operating under federal commodities law. The result of this litigation will impact state government, corporate entities, fans and athletes and how they interact with sports betting. As sports-related wagering continues to expand, legislatures and courts must address whether current regulatory schemes adequately protect consumers in an evolving marketplace.

Claire Kane is the 2026 Conduct Detrimental Writing Competition third place winner. This article placed her third.