Alex Kane, CEO of Sporttrade, deeply explored the integration of prediction markets and sports betting from a philosophical perspective in a recent webinar, highlighting the potential strategic role of tribes in this field. He analyzed the emerging field with a gentle yet sharp perspective, noting that former competitors might now become partners, while companies originally in the same camp might split.
At the "New Normal" online seminar hosted by the Indian Gaming Association, Kane shared his unique insights into the tension between prediction markets and traditional betting as a guest. Sporttrade's product form is similar to prediction market companies like Kalshi, but it operates as a state-licensed sports betting company, not as a federally designated contract market (DCM).
Therefore, in April, Sporttrade formally wrote to the U.S. Commodity Futures Trading Commission (CFTC), requesting to explore the possibility of transitioning to a DCM. The CFTC, originally a small regulatory body, is being pushed to the forefront against the backdrop of a heating prediction market, facing unprecedented scrutiny.
In the seminar, Kane did not take an adversarial stance but tried to bridge traditional betting and prediction markets. He candidly stated that the IGA had intended to invite a representative from Kalshi to participate in the discussion, but he was willing to act as an "interpreter" to help the industry understand the potential and risks of prediction products.
Exchange or betting company? Kane's dilemma
Sporttrade currently holds sports betting licenses in Arizona, Colorado, New Jersey, Iowa, and Virginia. Kane pointed out that Sporttrade is more like a "result trading platform," treating sports event outcomes as "codes" and matching buyers and sellers for transactions. He said, "It's like a transparent market system, and our goal is to continuously offer better pricing to users."
This model is very similar to prediction markets like Kalshi, but the difference is that Sporttrade chooses to follow the state-level betting path, not the federal DCM route. Kane recalled that this decision was made in 2020 when ErisX attempted to launch NFL contracts but was rejected by the CFTC and had to withdraw the project. Now that Kalshi has won its case, the prediction market is thriving, while traditional betting faces intensified competition, leaving Kane somewhat nostalgic.
"We spent a lot of money trying to do this in the most regulated way," Kane said, "Looking back, these resources might have been better used to build a stronger brand." He added helplessly, "The harder we try, the more marginalized we become."
Odds as language, user experience as the battlefield
One of Kane's reasons for supporting prediction markets is that it disrupts the traditional betting structure. In his view, traditional betting is often controlled by betting companies that arbitrarily limit bettors and even unilaterally cancel payouts. "This asymmetry is extremely unfair to users."
The essence of prediction markets is decentralization, with transactions led by users and prices determined by market behavior. Kane stated that this model is more user-friendly, reflecting the "true spirit of the market." In terms of user interface, prediction markets typically use percentages to express probabilities, which is much more intuitive than traditional American odds. He joked that if he were to get a tattoo, he would definitely choose "American odds should not exist" to be inked on his ankle.
The essence of betting, undeniable
While many voices try to package prediction markets as "hedging tools," Kane chose to be honest: it is still a form of betting. He argued that those who deny its betting nature not only contradict themselves but also underestimate the public's judgment. He exemplified, "If you say you're not gambling, but what you're selling is 'whether the Knicks will win,' you're insulting the user's intelligence."
Kane believes that instead of covering up, it's better to face the essence of betting and allow users to participate in a more compliant and open manner, "otherwise every word you say will lose credibility."
The caution and opportunity of the tribes
This discussion coincides with the CFTC's plan to hold an online meeting with tribal representatives on May 29. An earlier meeting scheduled for April 30 was temporarily canceled, sparking speculation. It is reported that most of the public comments received on the CFTC platform come from the Indian tribal community.
As the seminar host Victor Rocha said, the tribes are not opposed to prediction markets themselves but are concerned that new platforms might erode their gambling sovereignty. "We are not opponents; we just don't want to be excluded from rule-making again."
Kane pointed out that strong tribes, if willing to apply for a DCM license, are fully capable of launching their own prediction markets. This is particularly meaningful in states where sports betting is not yet legal, such as California and Oklahoma.
The collision of new and old orders
However, a potential risk is market fragmentation. If in the future, 25 to 50 exchanges offer similar contracts, the market will face challenges such as liquidity dilution and user diversion. Guests generally believe that the appeal of prediction markets may be significantly reduced as a result.
In the battle of prediction markets, Sporttrade and Kane are like pieces swept up by the tides of the times. His attitude is balanced, embracing innovation while not shying away from real limitations. In this battlefield where technology, regulation, and business intersect, every participant must find their own position.
Ultimately, will it be the tribes, the CFTC, or the exchanges that find consensus first? This is a question and also a gamble.
