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It’s no longer news that Prediction Markets are the hottest thing in the gambling world right now.
At the center of it, Betr, co-founded by boxer Jake Paul and CEO Joey Levy, is currently waiting on a pending application with the National Futures Association (NFA) to launch Betr Predictions LLC.
This isn’t just an app launch; it’s a strategic move to access big markets like California, where traditional sports betting is still blocked.
The Introducing Broker strategy
So, why is Betr dealing with the NFA (a federal body for the futures industry) instead of, say, the California Gaming Commission? Because Betr is trying to be certified as an Introducing Broker (IB) and a swap firm.
Unlike traditional sportsbooks, which bet against the house and are regulated under state gaming commissions, prediction markets operate as Introducing Brokers, regulated federally by the Commodity Futures Trading Commission (CFTC).
By becoming an IB, Betr acts as the simple front-end partner that can offer contracts on a federally regulated derivatives exchange. This is how they plan to bypass state gambling laws, which is the path several sportsbook competitors are taking.
Fanatics Markets launched its prediction market platform last week across 24 states, including in major non-sports betting markets like California, Florida, and Texas.
Fanatics Markets, like Betr intends to, works as an IB, connecting users to contracts cleared on a regulated exchange, in Fanatics case, Crypto.com.
Is California the whale for prediction markets?
California is definitely going to turn into the main event for prediction markets. Why? Because people in the most populated US state are desperate to get in on sports wagering with California sports betting still being illegal.
Polymarket knows this best. The prediction market plans to re-debut its platform in California. In 2022, Polymarket was forced to pay a $1.4 million fine and exit the US market after the CFTC nabbed it for operating an unregistered derivatives exchange. It was offering financial contracts without the necessary federal licenses.
After restructuring and acquiring a regulated entity, Polymarket is now CFTC-approved and ready to return.
Kalshi won preliminary injunction fight with California tribes
Betr will definitely face competition, but the market is set up more for collaboration since most companies are just IBs.
The main competitor in this legal fight is Kalshi, a platform that is actually registered as a Designated Contract Market, meaning it creates and clears its own contracts.
Kalshi has been in court battles across the country against states over oversight. But it scored a huge win in California when a federal judge ruled that the state’s tribal gaming compacts and the Indian Gaming Regulatory Act don’t apply to Kalshi’s prediction markets. He refused to honor the preliminary injunction the tribes were seeking to halt Kalshi operations on their lands. The case continues.
Betr will either compete with Fanatics and Polymarket for user attention or, more likely, partner with an exchange like Kalshi to offer its contracts. In this new federally regulated match, the winner isn’t the one with the biggest bankroll but the one with the cleanest legal paperwork.
