New York Bill To Legalize But Restrict Prediction Markets

Prediction Markets Could Be Legalized with Restrictions in NY Thanks to Proposed Bill

Last week, New York Assembly member Clyde Vanel introduced bill A09251, which would legalize prediction markets in the Empire State. Bill A09251 would also place heavy restrictions on what market operators could be created.

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Key Highlights
+ Limits: A New York bill would legalize prediction markets, but it would place limits on the types of markets that could be offered.
+ No Sport: Restricted markets would include catastrophic events, some politics, death markets, securities, and sports event markets.
+ No Props: Virtually all sports event markets, as well as prop event markets, would be banned under this new bill.

Bill A09251's Long List Of Prohibited Markets

Reacting to the growing popularity of prediction markets, the New York State Assembly put forward a bill to address the emerging industry. Assemblemember Clyde Vanel's bill would allow prediction markets to operate in New York, but with conditions.

Clyde's bill would prevent a prediction market platform from offering the following types of event contracts:

Catastrophic Event Markets
Political Markets
Death Markets
Securities Markets
Athletic Event Markets

Political market restrictions would prohibit platforms from offering event contracts on federal and New York state elections. It also prohibits event contracts on the actions of federal and New York state agencies, as well as their employees and leaders.

The athletic event market restriction is perhaps the most important. It's no coincidence that prediction markets exploded in popularity once they started offering event contracts for sporting events. Losing the ability to host these contracts would be a massive blow to a prediction markets business.

Bill A09251 would prohibit sporting event contracts on the outcome of athletic events and events within the event. Game lines such as outright winners, points spreads, and totals would be prohibited, as well as any game or player props.

The only sports event contacts that could remain would be those for the final outcome of a tournament or an overall championship, such as Super Bowl markets.

Other Provisions of Bill A09251

The bill would also place certain limits or requirements on operators. Namely, they would have to bar customers from funding their accounts using credit cards, and could not sell gift certificates.

They would have to establish self-exclusion lists for customers. A measure that sportsbooks already follow in the state.

Customers must also be given the option to set daily, weekly, or monthly deposit and spending limits on the platform.

Bill A09251 Won't Impact Anything, Yet

Currently, passing Bill A09251 makes no difference for prediction markets.

Prediction market platforms currently operate by holding a designated contract market license from the Commodity Futures Trading Commission (CFTC). With that license, operators believe they can only be regulated by the CFTC, and thus don't adhere to state laws.

Operators like Kalshi have taken that belief to court, with mixed results. Kalshi received early positive signs in Nevada and New Jersey, where the firm received a temporary injunction against cease-and-desist letters from state regulators. But in Maryland, that success was not realized when a judge believed Kalshi failed to show "a likelihood of success" in its case.

Kalshi has sued New York's gambling regulator, arguing the New York Gaming Commission has "overreached" in sending a cease-and-desist letter. Should Kalshi see a similar fate as in Maryland, it will likely have to delist most of its sports event contracts.