US Gambling Problem Worsens, Prediction Markets Risk Mirroring Sports Betting

University of Washington researcher Uttara Ananthakrishnan said the online gambling problem in the U.S. is worsening, and the boom in prediction markets may expose vulnerable gamblers to many of the same risks as sports betting.

Comparing prediction markets to sports betting apps, Ananthakrishnan said: "For people with gambling addiction problems, the risk is equally high."

Online betting removes barriers

Ananthakrishnan said smartphones have removed barriers to gambling, allowing users to place instant, repeated bets without leaving home.

When asked about former U.S. Surgeon General Jerome Adams comparing sports betting to the opioid epidemic, she agreed.

"At least with opioids, you have to leave your house to find someone," she said. "Here, you're just sitting there, phone on, credit card attached."

She said micro-betting, placing wagers on individual plays during a game, intensifies the risk.

"Micro-betting is like a slot machine."

Is tax revenue worth the costs?

Ananthakrishnan said research on the impact of legalizing online sports betting has found rising bankruptcy and crime rates, worsening credit, and other social harms.

She also questioned whether states are earning enough money to justify these costs.

"They're going to spend a lot of money cleaning up all these downstream effects," she said.

Meanwhile, Kalshi is fighting states in court to prevent their gambling laws from applying to its contracts, arguing that federal regulation by the CFTC takes precedence.

The New Jersey Office of Legislative Services estimates that a 9% surcharge on prediction market operators could generate $10.3 million to $15.3 million in revenue in fiscal year 2027.

AI may make quitting gambling harder

The New York Times recently reported that DraftKings Inc. built a machine learning model to identify customers likely to gamble and lose more money after receiving promotions. DraftKings denied improperly targeting customers based on losses.

The New York Times also reported, citing four former employees, that DraftKings delayed or killed efforts to use similar technology to predict which customers might develop gambling problems.

Ananthakrishnan said algorithms can identify the moment a gambler is ready to stop and place another incentive in front of them.

"It's not even extra money, it's points that ensure you keep playing," she said.

She also pointed to "dark patterns" in gambling apps, including instant deposits, harder withdrawals, and VIP progress bars, while platforms collect data on "every swipe, every click," even how long users hesitate.

Prediction markets blur the line between gambling and investing

At Robinhood Markets Inc., event contracts sit alongside stocks and crypto, generating $156 million in revenue in the second quarter, surpassing its $100 million in crypto revenue.

"Many people view sports gambling as an investment," Ananthakrishnan said.

This raises another question: who protects problem gamblers? Kalshi operates under the Commodity Futures Trading Commission rather than state-level gambling regulators.

She said whoever regulates prediction markets needs to have the capacity to handle problem gambling and addiction.

"If the CFTC doesn't have that capacity, then what's the point of regulating it?" Kalshi was contacted for comment but did not immediately respond.

Kalshi has an existing data cooperation agreement.