Aloha May Mean Goodbye for Prediction Markets in Hawaii

• Hawaii Democrats introduce bill to ban prediction markets in the state
• Ban would apply to broad swath of event contracts, extending beyond sports
• State has long been averse to gaming expansion

Hawaii lawmakers want to wave “aloha” — the goodbye varietal — to prediction markets.

Democrats there introduced House Bill 2198 – legislation that if enacted into law would ban a broad swath of event contracts, extending well beyond the sports derivatives that have brought the prediction markets industry into the mainstream.

The legislature finds that recent developments in the consumer-focused sector of the financial market have allowed for individuals to create financial incentives and motivations for the occurrence of events involving athletics, politics, catastrophe, and death,” according to text of the bill.

Included in the bill are comments on event contracts violating various “moral and ethical standards” and the view that prediction market operators are exploiting loopholes in Hawaii’s famously stringent gaming laws. That state and Utah are the only two in the nation where no forms betting are legal, not even a state lottery.

Hawaii Taking Aim at Prediction Markets

While far removed from the mainland, Hawaii is joining a growing list of states of states applying scrutiny and legal pressure to prediction market operators.

“Accordingly, the purpose of this Act is to update Hawaii’s gambling laws to expressly prohibit prediction event contracts relating to sports, contests, people, politics, catastrophe, and death,” according to the legislation.

Currently, prediction markets are legal in Hawaii because the industry is relying on the assertion that it’s beholden to federal, not state regulators. The Commodities Futures Trading Commission (CFTC) regulates prediction markets, but given the recent spate of state legal wins against event contract companies, those firms may not be able to continue depending on their status as federally regulated entities.

Hawaii Wants to Amend Definition of Gambling

Hawaii, which has a history of considering gaming expansion only to ultimately reject it, could revise its current law’s definition of gambling in an effort to prohibit prediction markets from doing business there.

HB 2198 indicates that a person is gambling if they’re staking something of value on the outcome of an event they cannot control. The legislation makes clear that futures contracts aren’t gambling, but the lawmakers aren’t lumping event contracts in with traditional financial derivatives.

Supports of the bill want Hawaii’s gaming laws to reflect that financial products contingent upon the outcomes of future events include sporting events, political races, natural disasters, and deaths — all things available on prediction markets to wager on.