On Wednesday, the CEO of a sportsbook who came up with the idea of an exchange for sports betting spoke on both sides of a webinar.

The rise of prediction markets has changed the way people in the US play games in an unusual way. People who were formerly enemies are now friends, and vice versa. Depending on how you look at it, stakeholders are both listening and getting ready for a fight.

The Indian Gaming Association's New Normal webinar on Wednesday was a great illustration of this. Alex Kane, the CEO of Sporttrade, shared his thoughts from both a traditional bookmaking and a prediction market point of view. Sporttrade has been at the center of the prediction market discussion because it offers a similar exchange product but runs as a state-licensed sportsbook instead of a federal designated contract market (DCM) like Kalshi and others.

Kane wrote a letter to the Commodity Futures Trading Commission in April asking to be allowed to work as a DCM because of this discrepancy. The CFTC has been in the news a lot lately because prediction markets have become so popular.

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In some ways, Kane was a middle ground voice in the argument, combining ideas from both sides. Last week, host Victor Rocha, who is also the IGA's conference chair, indicated on the webinar that he was attempting to get people from Kalshi to come on the show. But Kane acted as a go-between in certain ways, explaining the pros and cons of the new services.

At the right moment and place
Five states—Arizona, Colorado, New Jersey, Iowa, and Virginia—have given Sporttrade permission to run sports betting. Kane said that the business works like an exchange, like the Nasdaq. The main distinction is that "our tickers are not stocks; they are outcomes" in sports.

"We list those outcomes and then we match buyers and sellers," he said. The end result is "a very open and transparent system" that lets the company "publish the best results to the market."

This is the same model as contracts for sporting events on prediction markets. The only distinction is that Sporttrade chose the "traditional" state-by-state path instead of the federal DCM way. Kane said that this decision was taken in 2020 because another exchange that is no longer in business, ErisX, tried to self-certify NFL futures that year, long before Kalshi won a case against the CFTC in federal court.

The CFTC said that those kinds of contracts were not in the public interest, and ErisX eventually pulled them back. Brian Quinentz, who is the nominee to be the next head of the CFTC, was a commissioner at the time and publicly disagreed with that finding. After seeing that, Kane decided to change Sporttrade into a more traditional sports betting firm. Five years later, prediction markets are doing well, but sports betting is getting more and more competitive. In this way, Kane was like a tragic character.

"We spent a lot of money trying to do this the right way," he said. "That money could have been used to make a bigger brand and name." He went on to say that it "doesn't feel right" to be "subjected to the sidelines when we've been pushing this all along."

Death to American odds
Kane gave a number of reasons why prediction markets are a good idea. Kane said that the chance to break away from established bookmakers, which he called "anti-consumer," was perhaps the largest. He added that bookmakers may do whatever they want, such fixing lines, limiting bets, and cancelling rewards without any consequences.

On the other hand, bettors, or traders, are what make prediction markets work, just like all other open exchanges. Even though they depend on market makers, or third parties who make sure there is enough liquidity by making trades, the prices alter along with how the market reacts. Jason Giles, who co-hosted, termed this the "essence of entrepreneurialism."

Also, the user experience is considerably easier because odds are shown as regular percentages instead of the conventional sports betting terms. Kane said that younger people found the old betting language too hard to understand and that US odds "are a way to obfuscate what's going on."

Kane claimed he doesn't like tattoos, but if he did get one, it would say "American odds should never have existed" on his ankle.

"Don't get it wrong: This is betting."
If the ties between stakeholders weren't already complicated, Kane made things even more so on Wednesday by clearly saying that exchange betting is betting and not a real economic venture. This kind of position puts Kane and Sporttrade midway between bookmakers and exchanges.

From the start, the topic of purpose has been at the top of the list. Kalshi's main point is that prediction markets really do help people protect their money. This argument worked when it came to wagering on elections, but critics have used it since then. For instance, critics would say, "What real hedging opportunity does a contract for the Knicks to win a game against the Celtics that doesn't clinch the playoffs give?"

Kane said that Kalshi's claim that prediction markets aren't betting is an insult to the public's intelligence. On the other hand, states and bookies also brag about record revenues and hold percentages, which makes the real meaning of consumer protection more and more unclear.

Kane added, "I think everyone has a pretty good BS detector." "And if you say anything like that, the problem is that it makes everything you say after that useless right away. Sadly, or maybe happily, this is a highly complicated subject. "Customers" won't go on that journey with you if you start by saying the sky is not blue.

Get in where you fit in Wednesday's talk came just one day after InGame reported that the CFTC had contacted some tribal groups to meet online on May 29. This is a big change from a meeting that was supposed to happen on April 30 but was suddenly cancelled with no explanation. It was said that that meeting would be more in-depth, with an agenda that lasted all day with many people attending, but this was never confirmed in public.

When the CFTC launched a portal for public comment this year, most of the comments came from tribes. As the panellists talked about, Indian Country isn't against prediction markets in general, but tribes are worried about losing their gaming rights.

Rocha stated, "We don't hate everything we see." "We've had a bad experience with people saying, 'This is how it's supposed to be.'"

As time goes on, it becomes evident to both tribes and bookies that it could be preferable to offer prediction markets than to resist them. Kane said that nothing stops anyone from getting a DCM license, and the biggest gambling tribes now have the money and players to make them work. This is especially true in tribal states like California and Oklahoma where sports betting is not legal.

But that situation would also make people wonder if the market is full. If there were 25 or 50 exchanges providing basic contracts on the same events, would prediction markets still be a good business? Panellists concluded that it was most likely not.