Matthew C. Turk (Indiana University) has posted Prediction Markets as Regulatory Arbitrage on SSRN. Here is the abstract:
This Essay provides a unique legal analysis of the rise of prediction platforms such as Kalshi and Polymarket. Due to the recency of commercialized, publicly accessible prediction markets, they are only just now beginning to receive attention in the legal scholarship. Most of the early academic commentary on the subject, however, takes a highly normative slant. The focus is on the costs-and-benefits to society of prediction markets, often through a skeptical lens that emphasizes dysfunctional aspects of prediction markets such as insider trading scandals. By contrast, this essay is agnostic on whether prediction markets are a good or bad thing, and instead examines the particular legal environment that prominent prediction platforms have managed to carve out in order to achieve their booming popularity. That analysis highlights the central role of regulatory arbitrage in shaping the legal landscape of prediction markets, along with the political economy dynamics underlying the contested and still evolving regulatory framework that governs those markets.
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