Why prediction platforms are sitting out
The largest horse race in the country, the Kentucky Derby, is held in Louisville on Saturday. If you want to bet on Kalshi, Polymarket or any other prediction platform regarding the event, you are out of luck.
No Kentucky Derby event contracts are offered on the major prediction platforms, which host contracts on everything from sports results to geopolitical events to reality TV show moments, but not horse racing..
Bill Carstanjen, CEO Churchill Downs, The company that owns the Kentucky Derby and the racetrack where it is held told CNBC that horse racing is unlikely to feature in prediction markets because racetrack owners don’t want it.
“To make a deal, you have to go to us, who own the racetracks,” Carstanjen said in an interview this week. “And from our perspective, that’s not something we’re interested in doing.”
Horse racing has long been part of his own little fiefdom. Betting on races, America’s original form of sports betting dating back to the colonial period, had special status even before the Supreme Court in 2018 struck down a law that prevented states other than Nevada from offering sports betting.
By law, under the Interstate Horse Racing Act of 1978, offering bets on horses requires express permission from the host racetrack, the horsemen’s group of owners and trainers, and the state racing commission where the race is held.
This left out the burgeoning industry of prediction markets.
“Prediction markets are not something that will be good for horse racing or the economic paradigm under which our industry operates, which funds horse racing winners,” Carstanjen said.
Kalshi declined to comment on the lack of horse racing on his platform. Polymarket did not respond to a request for comment. Representatives of the Commodity Futures Trading Commission, which regulates event contracts, similarly did not respond to a request for comment.
The tension raises an interesting question about when and in what context permission is needed for prediction market platforms to offer contracts on a particular event.
US states have argued that companies like Kalshi and Polymarket need permission (by way of licensing) to offer sports betting. The prediction platforms argued that they did not need a license because their platforms offered investment and trading activity, not gambling, and they were regulated by the CFTC.
The CFTC has filed numerous lawsuits against states seeking to block them from taking action against prediction platforms.
Kentucky, on the other hand, took a tough stance on the predictions. Lawmakers in the state have proposed legislation that would ban any gambling license holders from making predictions. It is also proposed to impose a 17.5% tax on prediction market fees.
Meanwhile, there’s still good old-fashioned gambling for Saturday’s Derby. Churchill Downs said it has seen an increase in betting during Derby Week leading up to the big race.
Caesars, He also said the amount of money invested in the Kentucky Derby has exceeded expectations.
— CNBC’s Jessica Golden contributed to this report.
Disclosure: Kalshi and CNBC have a business relationship that includes a minority investment.
