In South Carolina, a debate has flared up over whether the operation of online platforms that call themselves prediction markets and take money on the outcomes of sporting events can be considered legal. Critics argue that, in essence, this is sports betting, which is prohibited in the state, but the services continue to operate, citing federal approval.
The issue has become noticeably sharper in recent months amid the rapid growth of such platforms and increased scrutiny from federal lawmakers of their legal status. In Washington, there is more frequent discussion of where the line is drawn between financial contracts and gambling when the subject is the outcome of a game.
Who Should Set the Rules for Gambling
The key idea of the participants in the dispute who are siding with the state boils down to a principle long embedded in the U.S. system of federalism. Gambling policy traditionally falls within the states’ jurisdiction, because the costs of enforcement, consumer risks, and social consequences are borne locally.
In an op-ed that became one of the catalysts for the debate, it is emphasized that the rules should be determined by the South Carolina legislature, not by a federal regulator and not by companies that rebrand, replacing the word “bet” with the word “prediction.” In this approach, one can hear a dispute not only about terminology, but also about who sets the limits of what is permissible within the state.
How Prediction Markets Work—and What the Objections Are
Prediction markets offer users the ability to enter into monetary contracts on whether a particular outcome occurs, including the results of sporting matchups. On the surface, it may resemble an exchange-style mechanism, but for most participants, the idea is simple. People put up money for the chance of a payout if they guess the result correctly.
Critics believe the dispute rests on a semantic trick that helps circumvent local bans and requirements. The main complaints typically include several points.
- replacing the concept of a “bet” with a “prediction” or “contract”
- operating without licensing, mandatory compliance checks, or responsible-gambling rules
- no meaningful ties to the state’s economy or local oversight mechanisms
In South Carolina, this is perceived as a situation where gambling is entering the home through a side door, without encountering the usual regulatory barriers.
Why the Ban in South Carolina Remains a Political Reality
South Carolina has not legalized sports betting, and the current restrictions reflect a choice made by the local legislature. For supporters of this approach, it is a matter of values and priorities, as well as the allocation of responsibility, because the consequences of gambling are borne by communities, health and social services, and the state’s law-enforcement system.
At the same time, the op-ed under discussion includes a personal aside by the author, showing the ambiguity of the topic. He notes that he is not inclined to support a prohibitionist model and more than ten years ago helped draft a bill that would have allowed poker in private homes. However, even with that view, he insists on a different principle. The decision to allow or ban should remain at the state level, not appear by bypassing the state’s political process.
Online casinos are also prohibited in the state, although many residents still play through offshore platforms. For the most part, they actively use mobile apps—experts’ data indicate that. Our review found that top aviator game app and other popular iGaming apps are available to players in South Carolina. There are also no apparent barriers to downloading the apps. And yet it is important to remember that foreign sites and apps are technically accessible, but not legal under state law.
The Platforms’ Federal Argument—and the Limits of Authority
Companies developing prediction markets tie their legal position to the U.S. Commodity Futures Trading Commission, known as the CFTC. They interpret federal oversight as grounds to operate nationwide, including in states where sports betting is prohibited, thereby shifting the dispute to the division of powers.
Critics respond that the CFTC’s mandate has historically been tied to markets for commodity and financial derivatives, that is, derivative instruments whose value is based on underlying assets. Classic examples cited include contracts tied to agricultural commodities, corn and soybeans, as well as oil and other commodities. In that framework, sports look out of place, and the attempt to bring match results under financial oversight is perceived as regulatory overreach beyond its intended purpose.
Senate Questions and the Practical Impact on States
The backdrop for the new round of debate was Senate hearings held in the fall as part of discussions of nominations and the commission’s agenda. Senators asked direct questions about the permissibility of contracts tied to sporting events and whether the financial regulator is becoming a tool for circumventing local bans.
This debate is no longer theoretical due to the scaling of the platforms. In states where sports betting is legal, the industry usually exists within a tightly regulated framework, including licensing, audits, and harm-reduction measures related to gambling behavior. In South Carolina, where sports betting is not permitted, there is no established oversight infrastructure for such services, and consumer-protection mechanisms are unclear.
Taxes, Competition, and the Proposed Resolution in Washington
The financial dimension has also become a source of tension. Materials from supporters of a strict division of powers emphasize that, in such a scenario, the state receives no tax revenue from platforms that take money from residents but do not bear the usual regulatory burden.
A competitive imbalance is also mentioned separately. Where sports betting is permitted, licensed operators pay fees, undergo checks, and fund responsible-gambling programs. Unregulated services in this picture gain an advantage due to the absence of comparable costs, and the market itself begins to resemble a race run under different rules over the same distance.
As a possible solution, the federal agenda is discussing clarifying the limits of the CFTC’s authority and closing a loophole that allows sports betting to be treated as a type of financial contract. Under this approach, the regulation of gambling, including the question of legalizing or banning sports betting, would again be vested in the states and their legislatures.