Major prediction markets are embroiled in lawsuits across the country, with some states like Arizona banning some operators altogether. State governments argue that the services are sidestepping necessary gambling licensing laws, while prediction markets maintain they shouldn’t be subject to state-level regulation.

While there are some ways that prediction markets mimic traditional gambling, especially sportsbooks, there are also clearly ways that they are innovating. Traditional gambling operators wouldn’t offer so many entertainment or political bets – if any at all. Local betting shops don’t offer odds on what a tech CEO is going to say in the next all-hands meeting.

These types of off-the-wall bets are attracting a new crowd who wouldn’t typically be betting. Speaking to Sigma, CEO and founder of Yield Sec Ismail Vali noted that those under 30 are the most responsive to prediction markets and their current affairs-style event contracts.

“Under-30s don’t think they’re gambling,” he said. “They genuinely believe they’re predicting. Whatever that means, but it’s not gambling when it absolutely is.”

Gambling innovation has a long history of operating in the legal gray areas

Part of the reason why prediction markets have surged in popularity so quickly, and why they’re getting so much pushback now, is because they operate in the legal gray area.

There is virtually no specific regulation for what prediction markets can offer event contracts on, as they’re currently overseen by the Commodity Futures Trading Commission (CFTC), which treats them as derivatives exchanges. Some market leaders like Kalshi are working proactively with the CFTC to keep up this relationship, rather than move to state-by-state regulation like traditional gambling.

“Prediction markets are a perfect example. They borrow mechanics from futures and options markets, behavioral incentives from gambling, and speech-based framing that resembles polling or forecasting. That hybridity creates regulatory ambiguity, which is where innovation thrives.” – Braden Perry, Kennyhertz Perry, LLC, attorney

Prediction markets may be the current example of gambling innovation springing up just past the line of official regulation, but past examples have included sweepstakes, slot machines, daily fantasy sports games, and a wealth of other once-innovative, now-normalized (and regulated) gambling methods.

“Most gambling laws in the US were written to regulate clearly defined activities: casinos, sportsbooks, lotteries, or regulated derivatives markets,” Braden Perry, a litigation, regulatory, and government investigations attorney with Kennyhertz Perry, LLC, explained to ReadWrite. “Innovation happens when a new product doesn’t fit neatly into any of those boxes.

“Prediction markets are a perfect example. They borrow mechanics from futures and options markets, behavioral incentives from gambling, and speech-based framing that resembles polling or forecasting. That hybridity creates regulatory ambiguity, which is where innovation thrives.”

As Perry goes on to note, this is far from incidental. The developers of prediction markets seemingly skirt regulation to create something new, avoiding being weighed down by regulatory ties.

“Developers tend to design products right up to the edge of existing definitions: avoiding ‘chance’ by emphasizing skill or information, avoiding ‘wagering’ by using contracts or tokens, or avoiding ‘consideration’ through alternative purchase mechanisms,” he stated. “This is not accidental. It’s a direct response to highly prescriptive gambling statutes that leave little room for licensed experimentation.”

Where does regulation need to step in?

Prediction markets are in a lightning-in-a-bottle stage right now. With little specific regulation beyond what applies to derivatives exchanges, the playing field is fairly open for experimentation. That’s both a good thing for consumers in terms of offering a lot of variety, but also exposes both users and third parties to potential risk.

“Regulators are often reactive rather than proactive in this space,” Perry continued. “Agencies typically wait for scale, harm, or public visibility before stepping in, especially when jurisdiction is unclear, such as between gaming regulators, securities regulators, and commodities regulators. That delay effectively becomes a window for experimentation.”

A recent example centers around Coinbase CEO Brian Armstrong, who poked fun at prediction markets in the company’s quarterly earnings call on October 30.

lol this was fun – happened spontaneously when someone on our team dropped a link in the chat https://t.co/tQiV3B9jUj

— Brian Armstrong (@brian_armstrong) October 31, 2025

“I was a little distracted because I was tracking the prediction market about what Coinbase will say on their next earnings call,” Armstrong said in his parting remarks, as reported by Bloomberg. “I just want to add here the words Bitcoin, Ethereum, blockchain, staking, and Web3, to make sure we get those in before the end of the call.”

While naturally just being a lighthearted comment, his comment shows just how easily he could manipulate such event contracts. If Armstrong put money on him saying that string of words, he can then easily fulfil said event contract. Make the words something even more random, raise the odds, and he could make even more off the back of it.

There’s no real regulatory framework to prevent anyone from doing this currently, highlighting how such rules are not just prohibitory but also protective for everyone involved. In time, organizations will need to catch up, whether that’s on a state or federal level.

“Historically, this is how many now-regulated products began: daily fantasy sports, online poker, esports wagering, and even early financial derivatives,” Perry said. “Grey areas aren’t a bug in gambling regulation; they’re a structural feature of how innovation tests outdated legal frameworks.”

Featured image: Midjourney

The post Prediction markets thrive in gambling’s legal gray areas appeared first on Our Story Insight.

Shares fell by more than 3% in after-hours trading after finishing regular trading up 1.7% to $234.11. Both Google-parent Alphabet and Microsoft posted big cloud computing revenue gains this month.

AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, down from 39.5% in this year’s first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023.

AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion. By comparison, sales for Microsoft’s Azure rose 39% and Google Cloud gained 32%. REUTERS

AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. By comparison, sales for Microsoft’s Azure rose 39% and Google Cloud gained 32%.

After competitors’ strong showing, “AWS is lingering at 17% growth,” said Gil Luria, a D.A. Davidson analyst. “That is very disappointing, even to the point where if Microsoft’s Azure continues to grow at these rates, it may overtake AWS as the largest cloud provider by the end of next year.”

Amazon expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts’ average estimate of $173.08 billion, according to data compiled by LSEG. The range for operating income in the current quarter was also light. Amazon forecast between $15.5 billion and $20.5 billion, compared with expectations of $19.45 billion.

Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand.

AWS represents a small part of Amazon’s total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon’s overall operating income.

While Amazon has poured billions of dollars into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing concerns that the company could be trailing rivals in AI development. CEO Andy Jassy, above. REUTERS

While Amazon has poured billions of dollars into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing concerns that the company could be trailing rivals in AI development.

The AWS results are “alarming,” said Dave Wagner, portfolio manager for Aptus Capital Advisers, which holds Amazon shares. “Amazon is an operating leverage story and they had to be able to grow, at least relative to costs. And they haven’t done it.”

The Seattle-based retailer posted online store sales of $61.5 billion, an 11% gain. Advertising sales, a fast-growing segment for Amazon, were up 23% to $15.7 billion.

Investors have been watching Amazon’s e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. US data showed consumer spending rose moderately in June.

Amazon posted online store sales of $61.5 billion, an 11% gain. REUTERS

President Trump’s tariffs have dampened the US retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact.

Trump has said the levies will bring manufacturing power and jobs back to the US.

Analysts had said Amazon’s focus on low prices, quick delivery and the sheer number of product categories helped cement its position as the No. 1 e-commerce retailer for US consumers, giving it an edge over rivals.

Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month.

The company has been trimming jobs in its corporate offices, including at its AWS, books, devices and podcasting units. Its efforts were showing results: headcount fell by 14,000 workers from this year’s first quarter, bringing the total to 1.46 million.

The post Amazon posts weak cloud growth while rivals Google, Microsoft thrive appeared first on Our Story Insight.