New York AG warns against predicting market risks ahead of the Super Bowl

Days before Super Bowl 60, New York Attorney General Letitia James had a message for consumers: Be careful about placing trades in prediction markets.

“New Yorkers need to know the significant risks posed by unregulated prediction markets,” James said in a statement Monday.. “It is abundantly clear: so-called prediction markets do not have the same consumer protections as regulated platforms. I urge all New Yorkers to be wary of these platforms to protect their money.”

Prediction platforms like Kalshi and Polymarket are expected to generate billions of dollars in trading volume around the Super Bowl.

Consumers can place trades on in-game events – similar to online sports betting such as Kings Project or FanDuel – as well as pre-determined outcomes, such as which companies will announce during the Super Bowl, an issue CNBC Sport reported last week.

James said the platforms’ products are bets “disguised” as event contracts.

It warned there were concerns about the emerging prediction market industry, including “upholding the ban on insider betting and demanding a regulatory review to ensure the financial stability and integrity of gambling operators.”

“Prediction markets may appear as modern, high-tech platforms for speculation or ‘forecasting,’ but in practice, many operate as unregulated gambling without the basic protections that New York consumers deserve and expect from properly licensed operators,” James said in the statement.

Prediction market contracts trade somewhat similarly to all-or-nothing options, with contract prices ranging between $0 and $1. Contracts are traded up or down depending on the action.

In addition to contracts for Super Bowl commercials, Polymarket and Kalshi offer other commercial deals related to the game, including things like “What songs will be played at the halftime show?”, “Who will be in the big game?”, and more traditional sports betting “bets” like “Seattle vs. New England: Most Rushing Yards,” as CNBC reported last week.

There are laws prohibiting insider trading in prediction markets, just as there are in traditional financial markets. But industry experts say they doubt the CFTC, which was recently eliminated as part of broad government cuts, has the will or the means to police those problems.

Last week, CFTC Chairman Michael Selig said he directed agency staff to withdraw a proposed rule that would have banned sports and political forecasting. New rules will come, he said.

Disclosure: CNBC has a commercial relationship with Calci.