UK-based betting exchange Smarkets is entering the U.S. market through two parallel paths, seeking federal approval while also applying to operate as a sportsbook in several states, according to founder Jason Trost.
The company, founded in 2008, filed for a license with the Commodity Futures Trading Commission in March. It also has pending sportsbook applications in Illinois, Iowa and Michigan, and already operates as a sportsbook in Indiana. Smarkets has recorded more than $60 billion in lifetime trading volume, Trost said.
“The reason we’re doing the dual track is because the legal situation is unclear if the CFTC has federal preemption or not,” Trost told CNBC. He noted that, like prediction-market rivals Kalshi and Polymarket, sports events are a major driver of Smarkets’ trading volume.
The regulatory environment for prediction markets has grown increasingly contentious. A number of states have argued that these platforms amount to illegal gambling, while the CFTC has sued multiple states to block their efforts to regulate the platforms. Last month, 44 state attorneys general wrote that the CFTC cannot be the sole regulator of sports-related event contracts on exchanges.
When New York filed a lawsuit against Kalshi in July, the platform dismissed it as “political theater,” adding that “states can’t just shut down a federally licensed exchange” and that such actions would push New Yorkers toward offshore operators.
Amid that tug-of-war, Smarkets is trying to cooperate with state regulators. It applied as a sportsbook in Illinois and Michigan, both of which have classified prediction markets as unlicensed sports betting. Trost said the company’s preference, however, is to operate as a CFTC-regulated prediction market exchange.
“We view it more as a hedge rather than we want to be active on a state level. You know, our preference is to be active on the federal level,” he said.
Trost agrees with states that argue sports-event contracts should be treated as swaps and fall under federal oversight. “The first choice would be for Smarkets to run as a prediction markets exchange regulated under the CFTC,” he said.
Smarkets is not the first to pursue this dual approach. Sports betting platforms DraftKings and FanDuel launched prediction markets late last year. During last week’s earnings call, Flutter, FanDuel’s parent company, noted that its prediction market platform can attract customers faster in states where sportsbooks face greater scrutiny.
Operating as a sportsbook in individual states comes with significant compliance and tax costs, Trost acknowledged. Still, he said he’s willing to navigate the “rough terrain” to establish Smarkets as a leading “good actor” in the industry.
The company’s experience across four European countries — including Ireland, Malta and Sweden — has helped it adapt to different regulatory landscapes, Trost said. He also stressed that operators in the space have a responsibility to follow regulation rather than work around it.
“Some of my competitors are in danger of ruining the reputation of this industry because I think they’re acting irresponsibly and not following regulation closely enough,” he said.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/15/prediction-markets-and-sports-betting-how-this-uk-exchange-is-trying-to-do-both-in-the-us.html
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