Prediction markets aren’t going away – harness racing needs to get in on the action

by Bob Duff

Prediction markets are all the rage in the betting industry, even if the people behind these so-called event contracts continue to insist they aren’t betting.

About that – with an event contract offered by a prediction market site, you choose one side or another of a potential outcome, and then you back it financially.

If it sounds like betting, and it looks like betting, then it’s probably betting.

It’s also exactly why traditional betting sites are up in arms about the creation of these prediction markets.

All of that is beside the point we’re trying to make here, though. The evidence overwhelmingly suggests that prediction markets aren’t going away. In fact, they are only going to grow to be a bigger part of the gambling pie. And that’s exactly why harness racing can’t stand idly by and watch another opportunity get away.

The sport needs to get in on this prediction market action, and it needs to do so ASAP.

WHAT ARE PREDICTION MARKETS?

Prediction markets operate similarly to a commodities exchange, as opposed to a betting site. Instead of placing bets against the house as you would wager at an online sports betting app, with prediction markets, you are choosing one side or the other of an outcome and banking on that outcome to happen. The event is on when others choose to back the opposing side of the outcome in a peer-to-peer competition.

In fact, not only do prediction markets work like a commodities exchange, but that’s also who regulates these sites. Prediction market sites are federally regulated by the U.S. Commodities Futures Trading

Commission (CFTC). Instead of the vigorish, or vig, that you pay to the sportsbook on a sports bet, prediction markets require payment of a trading fee.

Sites such as Kalshi and Polymarket are not only increasing in stature in the U.S. market, but these prediction markets are growing rapidly in popularity. As CFTC-licensed entities, they can offer event contracts in all 50 states.

That’s got the collective backs up of online sports betting sites operating in the U.S. market. Sports betting apps like DraftKings, FanDuel, and ESPN Bet are all regulated by state gaming commissions. And they don’t operate in many U.S. states.

Being federally regulated, the rules for playing an event contract with a prediction market are identical in every state. With state-regulated online sports betting, there are nuances in every state that impact how the rules of engagement work in each particular state.

Since the sportsbook operators are convinced that prediction markets offering event contracts are merely sports betting sites operating incognito, they are demanding that states move to prohibit the operation

of these prediction markets.

They are trying to do just that in many states. For the most part, though, they aren’t having much success.

PREDICTION MARKETS GOING MAINSTREAM

Here’s another reason why prediction markets won’t be going away. Both Kalshi and Polymarket, the two largest prediction market sites in the world, list Donald Trump, Jr. as an investor. In fact, the eldest son

of the current U.S. President also sits on the board of both companies.

If anyone thinks that Donald Trump is going to allow these sites to be shut down while they’re making money for his family, well, you just haven’t been paying attention to the way the U.S. government operates.

The prediction markets are going mainstream. Polymarket has a deal in place that sees it listed as the official prediction market site of X, the social media site formerly known as Twitter.

In late October, the NHL announced multiyear U.S. agreements with Polymarket and Kalshi. The league named both Kalshi and Polymarket as official prediction market partners of the NHL.

Around the same time, DraftKings announced the acquisition of Railbird Exchange, a prediction market site. It will be rebranded and relaunched as DraftKings Predictions.

That’s right. The sportsbooks have decided that if they can’t beat the prediction markets, they might as well join them. It’s the same approach harness racing should be taking. The sport needs to get in on the prediction market action.

YOU CAN BACK A HORSE TO LOSE

If you bet on the horses, then you’ve backed plenty of horses to lose. Not intentionally, mind you, but in actuality, it happens more often than not to horseplayers.

With prediction markets, you could deliberately back a horse to lose a race. Say there was an event contract in which you could choose to back a prohibitive favorite to not be the winner of a major stakes race. Imagine the price you could get on that contract.

The beauty of backing an outcome is that you are setting the prices. As more people back opposing sides of an outcome, the marketplace is constantly changing. And you can get in and get out whenever you desire by buying or selling a contract on an event.

Prediction markets were made for horse racing. And that’s why harness racing needs to find a path to become part of this emerging form of betting. The sport simply can’t afford to yet again be standing by and watching others benefit from a great idea.