Prediction markets are now a flashpoint in the debate over online trades and wagering. Minnesota could soon set the tone in regulating the platforms with an outright ban.

This week, the legislature sent Gov. Tim Walz a public safety bill which if signed, would establish the nation's first law to prohibit platforms like Kalshi from operating. Such apps allow participants to buy contracts with a payoff dependent on the outcome of just about any event, from global conflict to entertainment awards.

Annette Meeks, board member of the group Citizens Against Gambling Expansion, said in a recent committee hearing, prediction markets work around existing laws.

"Prediction markets are unregulated," Meeks pointed out. "They pay zero in state taxes and regulatory fees. That means that the state receives zero revenue from prediction markets but the state and all 87 counties are left to handle the social pathologies left behind."

She is referring to vulnerable residents and households struggling to emerge from problem gambling. Minnesota has seen heavy debate regarding online sports betting but so far has not legalized it. Other concerns raised about the markets include insider trading activity. Operators argued their platforms are different from gambling because there is no "house" setting the odds.

Some state lawmakers wondered if adequate regulations would be sufficient instead of a ban amid arguments the sites function similarly to traditional stocks.

Sen. Jordan Rasmusson, R-Fergus Falls, said he appreciates the questions but suggested popular companies make it hard because of how they present themselves.

"Their marketing department disagrees with their legal department," Rasmusson observed. "They're telling the marketplace that they're a gambling company, but then when they get sued for being a gambling company, they come and say, "No, no, no, we are futures markets."

Nearly a dozen other states have considered prediction markets legislation this year. The debate over regulations is also a big topic in Washington, D.C., with proposals circulating in Congress. Attempts to rein in the financial activity have led to legal challenges.

Source: Public News Service