New York Attorney General Warns Residents Over Prediction Market Risks

New York Attorney General Letitia James has issued a consumer alert cautioning residents about the financial risks linked to prediction markets ahead of Super Bowl Sunday. The statement argues that many of these platforms offer bets framed as event contracts while operating outside the New York Gaming Commission’s regulations.

The warning arrives as prediction markets grow more popular across the United States, particularly around major sporting events. James stressed that consumers may not fully understand how these platforms differ from licensed sportsbooks. 

Tension grows between federal oversight and state gaming rules

The alert highlights the current dispute between prediction market operators and state regulators. Companies such as Kalshi and Polymarket operate under federal oversight from the Commodity Futures Trading Commission, which classifies their products as financial contracts rather than traditional gambling.

However, state authorities argue that contracts tied to sports outcomes resemble wagering activity and should fall under existing gambling laws. This discrepancy has triggered legal challenges across several jurisdictions, as courts weigh how the products should be classified.

James said: “Ahead of the Super Bowl, New Yorkers need to know the significant risks with unregulated prediction markets. It’s crystal clear: so-called prediction markets do not have the same consumer protections as regulated platforms. I urge all New Yorkers to be cautious of these platforms to protect their money.”

Attorney General flags lack of consumer protections

According to the Attorney General’s alert, prediction markets may not offer self exclusion tools or responsible gambling programmes for protecting users.

The alert also warned about risks such as underage participation and aggressive marketing practices. Unlike regulated sportsbooks, the platforms are not obligated to contribute to problem gambling funds or undergo strict financial scrutiny from authorities.

James further warned that promoting or advertising unlicensed sports wagering could expose companies and individuals to civil or criminal liability under New York law.

Investment momentum continues despite legal pressure

Despite increasing scrutiny, prediction markets keep attracting significant investment as operators expand their product offerings. Market leaders have secured new funding rounds while major sports betting brands explore similar contract-based formats to engage younger audiences.

At the same time, financial institutions have reportedly flagged emerging risks tied to the sector, including concerns around overextended credit and rising loan defaults among users.