Are prediction markets gambling and how to address a reported surge in gambling addictions, that's this week on Nevada Week.

♪♪ -Support for Nevada Week is provided by Senator William H. Hernstadt and other supporters.

-Welcome to Nevada Week.

I'm Amber Renee Dixon.

In 2018 the US Supreme Court struck down a federal ban on sports betting, clearing the way for states to legalize it.

And in the years since, researchers say they've identified a sharp increase in online searches from people seeking help for gambling addictions.

That's according to a national study published in the Journal of the American Medical Association.

We'll get the Nevada perspective on that ahead.

But we begin with prediction markets, also known as event contracts.

They're available on trading platforms like Kalshi and Polymarket, and states like Nevada have an issue with how they are regulated.

Here's how they work: [bell ringing] Prediction markets are like the stock market and sports betting combined.

People buy contracts based on what they think the outcome of an event will be.

And as you can see on this app, these events can be sports.

They can also be the weather, the economy, elections.

For example, this event asks, Will Nancy Pelosi resign her office before the midterms?

If you think the answer is yes, you would buy a yes contract for 22 cents.

I'll put in my one contract there.

This app charges a 2 cent fee.

Each contract pays out $1.

And so if Nancy Pelosi does resign before the 2026 midterms, you would get a $1 payout, which includes the 24 cents you already paid and a 76 cent profit.

If Nancy Pelosi does not resign, though, the contract expires and you lose your money.

But you can also make money before there's an outcome.

Like a stock price, the value of a contract can rise or fall as new information becomes available and people change their expectations.

So you could sell your contract at a higher price than what you paid and lock in a profit before the event even happens.

So who should regulate these contracts?

The prediction market industry favors federal oversight, arguing these contracts are financial derivatives more like trades, while several states, including Nevada, say when they're based on sports, they're more like sports betting and should fall under state and tribal gaming regulators.

Here to expand on that and the role prediction markets are playing in the evolution of sports betting are Brett Abarbanel, Executive Director of the UNLV International Gaming Institute; professional sports bettor Steve Fezzik; and Stephanie Goodman, Executive Director of the Dr.

Robert Hunter International Problem Gambling Center.

Thank you all for joining Nevada Week.

So I want to start with the hot topic of prediction markets.

And, Brett, actually that came out of your mouth.

That is the hottest topic within your industry right now.

Why?

(Brett Abarbanel) This is the newest thing.

We are constantly seeing innovation and evolution of what can be done with betting.

And this is a really interesting one because it's not just an evolution of what gambling can be, it's an evolution of financial markets.

And as a result, we're seeing a lot of very public discourse on whether or not this is gambling, what it means for states in the US that have very strict laws around licensure for gambling, and then also what it means at a federal level here in the United States and how these different markets can be regulated.

We don't know yet if they're going to be determined to be federal-level financial markets.

And then even within that, there's a lot of different niche areas that we could discuss around the subjects and the assets that underlie the financial product that is a prediction market.

-You brought up states.

Nevada is currently fighting these prediction markets, claiming this is gambling and, if it's happening in our state, we should be regulating it.

You brought up, What will this mean for gamblers?

And so for that, Steve, what do prediction markets mean for gamblers right now?

(Steve Fezzik) They mean I get to purchase things cheaper.

All right?

I'm a mercenary.

I'm betting on the Super Bowl.

I don't want to lay minus 110.

A local casino has a minus 105 special.

Now, all of a sudden if I can hit 51.4% instead of losing, I'm winning at minus 105.

Well, guess what?

A lot of these prediction markets have pricing as low as minus 102.

So it's, I'm-- I do believe it's gambling.

I don't have a law degree, so I can't say how they're getting around this.

But it's basically I'm making the same wager at a cheaper price.

So from my perspective, I love prediction markets.

-You are paying the bookmaker less.

This is not a bookmaker, but, in this example-- -I'm getting the same product for less, without the-- but without the regulation and the safeguards.

-Okay.

Stephanie, your thoughts?

(Stephanie Goodman) Well, I think that prediction markets are predatory, especially when you consider that they are, they're talking to 18-year-olds.

And there's zero protection surrounding it, and they're very bold in marketing these individuals.

And you could be an 18-year-old and you have a Robinhood account, and then all of a sudden it comes up who's going to win the BCS game?

I mean, these sorts of things are-- It's not okay.

And I think my issue is, you know, I'm all about free markets.

I think that's great, but this is gambling.

You can word salad as much as you want.

It's gambling.

The fact of the matter is, there's zero protection surrounding it, and that's not okay.

And when you look at the number of 18- to 30-year-olds, I think 10% of 18- to 30-year-old males have displayed behavior that shows that maybe they have a gambling issue.

And then 26 of those people could-- 26% of those individuals, actually, they think might have a gambling problem.

So when we're looking at what we're doing to our youth right now, I think it's unacceptable.

-It's huge that the prediction markets allow entry at 18 years old in most states; whereas, sports betting typically happens when you turn 21 years old.

That earlier introduction, what kind of impact does that make, can it make?

-This is what I think: I think we have a whole generation of individuals, especially males, that have been playing video games.

Loot boxes are a form of gambling.

They're going to put money in, they're going to see if they'll get that skin that they want.

So that's a form of gambling.

So we've kind of been just, teaching these.

Loot boxes are you put money in.

As an adolescent, you're playing Fortnite, and you put money in as an adolescent, and you get this loot box.

And suddenly you're going to decide if you get the skin that you want or not.

And you're going to continue putting money at it, your parents' money, until you get the skin you want.

So there's this whole-- There's a whole concept that they've been, that they've been raised with.

And then you move on to the fact that here they are at 18, and they're going to start working with prediction markets.

It's not acceptable.

We do not teach gambling addiction to our youth, right?

So they're going to learn about alcohol, they're going to learn about drugs, they're going to learn about health, they're going to learn about all kinds of things in the K through 12 system.

I think we need to teach people that gambling actually is an addiction.

It's a legitimate addiction.

It's a DSM-5 addiction like alcohol and drugs.

And so for us, I feel like we really need to do a better job at the awareness piece when we're talking to our youth.

-Who is responsible for that awareness, creating that material and putting it out there?

Or do you want to add anything about video games?

Because I know that's a hot topic for you, too.

-I'd like to add something about prediction markets here.

I talked about innovation.

Prediction markets themselves are not a new product.

This is a financial product.

It's a derivatives market.

We've had futures markets for umpteen years, umpteen centuries.

-Centuries it goes back to political races.

-Political races, but also the idea that you have an underlying asset and you're buying a position about what will happen to that asset in the future.

So this concept of prediction markets, one of the major ways that has driven its growth has not been politics, has not been physical product, but it has been sport.

And prediction markets right now are 90 to 95% sport in terms of their volume.

And so when we talk about the various things that we've been discussing over the last, what, 5 to 10 minutes or so, a lot of this surrounds that concept of sport and whether or not sport is something that should be considered a betting product, versus a financial product.

We're not necessarily talking about like pork bellies or wheat or the weather.

We're really particularly focusing on sport, which has for such a long time been the purview of the states.

-And 2018 is when sports betting was legalized across the country for states to implement, but not at the national level.

What has happened in that time frame from your perspective?

I'm going to start with you, Steve.

Since 2018, what have you noticed?

-I've noticed that the major players have looked to increase their house advantage.

And so the rise of the same game parlay, which is, in Nevada, we always just, we bet on sides and totals.

We bet on the game.

We put $100 on it.

We got three hours of entertainment.

And even if we were a drunk baby just randomly picking some side winning 50/50, it cost us $4.54.

The point is, is that no one was ever going to lose a lot of money.

Just even betting $100 a game.

But now with the same game parlays, the house edge goes up, up to 10%, 20%, 30% the more teams you play, and there's no disclosure whatsoever.

And I would love to see almost like a cigarette package.

Like when you're playing a game, I'd like, like in the KENO room and on slot machines to say, You're playing a game that has over a 10% theoretical hold for the house, to protect the consumer.

Now, I know most people could-- they could research it and learn that themselves, but why not have that in front of them to, like, remind them, hey, this is a huge house edge game.

And if you're churning and you keep betting all these--we talked about these young youths, and it really is mortgaging their future--they're going to lose all their money rapidly, rather than slowly gambling in other ways.

-Quick antidote.

In 2002 I worked for the mayor, and the mayor called the commissioner of the NFL and said, Why won't you run our Las Vegas spot?

They would not run a spot from Las Vegas in 2002, and now we have Al Michaels telling us what the spread is.

And so for me, I feel like this acceptance of gambling is it's like it's just so accepted now, and it's so easy.

And the other night, my daughter and I are watching the UFC fight, and they had the prediction market right there on the screen.

And they're just showing it, and it's all so accepted and normalized.

And so there is not any protection surrounding that.

There is no-- I mean, we have our 1-800-GAMBLER on some of these spots at the very end in, you know, two-point font.

But the fact of the matter is, we just really need to educate people more.

And I think that's, that's the biggest issue is that it's become so prevalent, sports gambling and sports betting.

And the fact of the matter is we just really don't have enough protection surrounding it and enough awareness.

-Who's responsible for that education?

Who pays for it?

Should that be the federal government?

Should that be states?

Should that be the gaming companies themselves?

Who wants to start?

Steve.

-It has to be the federal government and the states because there's an inherent conflict of interest.

The providers of the gaming, they want people to be playing the high house edge games.

They don't want-- and this is documented in the movie Owning Mahowny, where they're just like, one of their, the casino employees tries to educate them, and they're like, he gets fired.

What are you doing?

These are our best customers.

So I really think either the states or federal.

I don't know which need to mandate the rules such that the patrons are educated and if they need help that they get help.

-We are state funded partially, but we also, I fundraise with industry, and we have some great industry partners, because there are certain people in the industry that really do care, that want to try to make sure, you know, they don't want to take the mortgage of a player.

So there are certain properties here in Nevada that really go above and beyond when it comes to that.

But the state does fund it, and so I think it's important for us to really get a little bit more support there, because we can only go as far as we can go.

So we're the biggest center in the state, but we, you know, we hit our dollars every year, but we're not exceeding it, because we can't get enough people in, because we're a fee-for-service type of product.

So that's how the state funds us.

So for me, we have to get more clients in.

We have to get more people to get help.

We're helping less than 1% of our state.

And 20 years ago, they did a prevalence study, and they said that 6% of our state had a problem, and that was before the phones.

That was before everything.

So imagine, we're helping less than 1%.

So we need that kind of ad campaign, "This is your brain.

This is your brain on drugs" kind of ad campaign out there that really tells people, Hey, gambling is a real issue, and there is help.

And guess what?

It's free.

So I think it's on the states, really.

I know that there was some federal legislation out there that did not pass.

And, of course, everyone would love more money to put towards this.

And if the states can grab some of that for us, you know, from a federal perspective, that's great.

But it really needs to be, I think, monitored through the states and pushed.

-Through the states versus federal?

-Mm-hmm.

-Stephanie, let me ask you.

So I see all the time, does-- if you have a problem gambling, what should you do, but it's never defined.

And I was just querying on some websites how much is too much to spend on a hobby?

Because obviously you can be addicted to handbags or golf and things that you're spending.

What popped up is you should have like a 10% hobby fund, like hobby and entertainment.

And I wonder if there's any way to quantify that to someone like, Hey-- Like just on gambling, a lot of-- If you're spending more than 5% of your income... And I know the person that's making billions, it's different, and they can do whatever they want.

But just for the average person, do you think like 5% would be like a general guideline?

And maybe you might have a problem if you go above that?

-I think it's more than a number.

So I don't think it's a percentage.

For instance, on our website we have, you know, an assessment.

You can answer these 20 questions.

-I hate that assessment.

You know why?

Because every coin collector spends time away from their family.

Every golfer is, has a golfing addiction.

They're spending time away from their family.

-Every professor of gambling tests positive.

-But are you leaving your kid, you know, at the daycare until six o'clock when you're supposed to be there at two?

-Golfing three times a week, they are.

-Listen, I'm not into sports addiction, but I know a lot about gambling addiction.

But for me, I do think that you need to ask yourself those questions and, you know, sure, you're spending money on golf, too.

There's prop bets.

There's all kinds of stuff.

We actually have advertisements out at some of the golf courses here, just to make sure.

-Is that right?

-Yeah, the tee wash, all that stuff.

But I really feel like, for us, you need to look at your lifestyle and what kind of choices are you making.

And, you know, then it even goes further.

Are you chasing your bets?

Are you trying to make up for the losses?

Are you-- When you're with your family-- I mean, I would venture to say that unless you have a severe problem, when you're with your family as an avid golfer, you're probably enjoying your family, right?

-You're not hiding how much you spent on your big birthday drive.

-Right.

But I'm just saying like, you know, it's that sort of stuff.

You're with your family, you're thinking about your losses, you're thinking about the lies you've told, you're thinking about the damage that you can cause.

And so it's just, it's just so pervasive.

-The next game that you can make money on and recoup your losses.

So you think federal intervention is necessary?

You would like more money from the states?

-States fine.

I'm really not qualified.

-Okay, okay.

But not, I guess your point is, you do not think that gaming companies should be responsible for this?

-I think it's a terrible conflict of interest.

Because if you take your best customers and educate them, they probably will gamble less.

And now you're doing disservice to your shareholders.

-To your own bottom line.

Let's talk about AI in betting.

-Oh, I was going to answer the other question.

-Well, go ahead then.

What's your question?

-So I think you've asked two questions, the who's responsible question and who pays?

And so when we think about who's responsible, I think that everybody is.

Every stakeholder who's in this place has some responsibility to think about what this means.

So, for example, personal responsibility.

If I'm going to participate in any activity, in some ways the onus is on me to know what it is I'm about to do.

If I am a state government or a federal government and I am going to legalize an industry, the onus is then on the government to think about what it means to have that sort of industry present, licensed, doing business in their jurisdiction and thus what it is they want to do in terms of tax monies.

And then, oh, here we are with the pay, who pays, to then allocate that toward different resources whether that's treatment providers like the treatment providers at the International Problem Gambling Center, whether that's the prevention experts.

So maybe there's marketing campaigns.

So everything from PSAs to broader campaigns that might take place that help educate the population.

And then I think that gambling companies have an element of responsibility, too.

I think that Steve's point is quite valid.

I also think that it's really important that there is an element of understanding and responsibility taken.

This is the business that, you know, for such a long time, we're Sin City.

It's because we think about these sorts of things as sin businesses.

And so the negative externality, to throw down with some economics terms to make myself sound clever, right?

The negative externalities that might come out of an activity like gambling, that's something that both the businesses and the governments have to think about.

And there's a balance to be struck.

The government wants a successful business.

It also wants to make sure it's protecting its population.

-And if I just may add quickly to that.

For us, it's about $5,000 per individual when they come into our center.

That's about how much it costs total to rehabilitate, rehabilitate them to a point where we have a 44% success rate in one year.

After that first year, if you come back twice, you have 92% success rate.

Very, very positive, good stuff.

And that money is also coming from the industry because they are our tax base.

So we get our money from the general fund, too.

So just to address that as well.

-Do you think that if you had more money for marketing there would be more people aware of your services and you would have more people that you would be serving?

-I'm an advertising person.

I mean, I actually came from gaming advertising.

So I, yes, I think that the advertising is huge, letting people know that it's okay, you're not weak.

The stigma that surrounds gambling addiction is also significant, and people are very ashamed.

-Right.

The AI aspect.

I brought that up in connection to responsible gaming, because these companies can monitor how much money someone is putting onto their app and see if it's maybe out of the norm and can detect kind of risky behavior.

What are your thoughts on their ability to monitor that activity?

-I think there's a great onus on the operator to use AI for good.

AI is a tool.

It's not automatically identifying somebody who might be able to empty their wallet in the way that--we'll go with Owning Mahowny here again-- might be able to do.

And it's not automatically going to identify what might be risky behavior.

So the tool has to be used in a purposeful and useful way, which can do both things.

It can offer personalized marketing opportunities for somebody who's seeking value like a professional gambler.

It also can and, frankly, should be used to identify what can be potentially risky behavior.

This, by the way, is still a very difficult thing to do.

Because it is not just identifying what might be risky behavior, it's also catching a person at the right time for an intervention.

And with that, I'll turn over to Stephanie to talk more about what it means once you get to that point.

-And what we need to be careful of, too, and what we found is, of course you want to add these protections.

But the more protections you add, then you have an individual going, I'm just going to go to the black market where there's zero protections.

So, you know, it's a very delicate space to try to balance.

Okay, let's give them enough protections, but not too much.

I mean, it is a little dance.

And I think that the responsible operators that are out there, I think they're really trying to navigate that in a way so that they can help their customers but also not be a burden.

-Stephanie brings up a great point.

I have a question for you.

So in an ideal world, I would have a-- -You're taking my job.

[laughter] -Oh, dear.

-Go ahead.

-In an ideal world, I would have all the casinos have databases of their-- Most of their players use players cards, so, boom, we can add up someone's loss for the year, and then we query.

We got their address, and we could look at what now-- they could be, you know, living way beyond or below or above their means.

But you could look and have a feel for what neighborhood they're living in and say, boy, these are our red flags.

These are the people, we probably do have a problem.

Is that something that you have looked to do?

Is it too much big brother that you're looking on over someone's shoulder?

-Or would that be more-- -Well, I think one of the limitations of what you just described is that not every operator has a physical presence.

Like we have properties on the Strip or downtown, Boulder Strip, et cetera.

A lot of the operators that we're discussing when it comes to these various products and subjects are digital.

And so while they may know generally where you live, it might not be a true reflection of what your available assets are.

-Last topic, prop bets.

The NCAA wants them to be banned because they say their athletes are getting harassed for not achieving whatever that prop bet is, you know, rushing for more than 35 yards, for example.

What is the answer here, in your opinion, Steve?

-Well, there's two issues, one being the player is being harassed, and the other is the integrity of this sport.

I'm going to just address the integrity of the sport.

I think 99% of people that bet, place very modest wagers.

So just put limits on these.

Don't let someone bet more than $200.

At that point, players are not going to be involved with point fixing of their points when the professional bettors, the bad actors can't get down anything significant.

So it's the United States of America.

I want to have as much freedoms as possible, but I recognize, let's not have these crazy situations where you're hearing about someone betting 450,000 on the first half game of a Southern Miss.

I mean, what are we doing?

-So by setting those limits, you're going to eliminate the big, big bad actors, I guess?

-Yes.

They're still going to get yelled at, though, in the stadiums, and I can't fix that.

-Brett, what do you think?

-I'll speak a little bit to the athlete abuse then.

This is a very big issue.

It's not something that's even limited to NCAA.

We're seeing this with sports across the gamut.

So it's not even just the biggest sports that we see.

We've seen commentary from, for example, sprinters who run in track and field in athletics.

And as we head toward the Olympics now, what might be happening across a very broad span of sport.

So these proposals, it's incredibly difficult.

While there's a lot of history in dealing with these sorts of issues from more mature markets-- So there's, for example, quite a lot of sports betting markets in Europe that are a lot more mature than eight years old for most of the United States.

Even they still don't necessarily have some sort of ideal solution to figuring out how to completely end athlete abuse, how to completely end sport integrity and breaches and fraud sorts of issues.

So when it comes to something like banning prop bets, we just-- There isn't evidence that this will work.

There also isn't evidence that it won't work.

And so the-- It's very difficult to put forward very prescriptive measures like this and say with certainty, yes, this is the solution we're looking for.

-Stephanie, you get the last word.

-Thank you.

If I may, I do think that when we look, when we look at the prop bets, I agree 100% with NCAA because, when we're talking about college athletes, it's just, take it out.

I mean, we already have NIL, which is already, I think, really changing the experience for-- -For players, yeah.

-It's changing the face of college athletics already.

And we have to remember, these are still young individuals.

And so for me, I just, looking out for their mental health.

Also just the nonsense of prop bets in college sports just, it's something I'm not excited about.

But let the adults handle it.

Let's keep it out of-- -And the financial implications.

If you're an NBA player, you're making your $8 million a year, versus that college kid that can't afford pizza on Saturday night if he doesn't have an NIL deal and he's at a lesser program.

-Yep.

-And is more susceptible to be, to be utilized and tried to manipulate it.

Okay.

Thank you all for joining Nevada Week.

And thank you for watching.

For more information on any of the resources discussed in this show, including what to do if you or someone you know is looking for help with a gambling addiction, visit vegaspbs.org/nevadaweek.

That's also where you'll find our interview with Danny Funt, sports journalist and author of the new book, Everybody Loses: The Tumultuous Rise of American Sports Gambling.

And I'll see you next week on Nevada Week.

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