Will Bitcoin reach $150,000? When will GTA 6 be released? How many gold cards will Donald Trump sell in 2025? Who will become the NBA champion? While these questions might seem unrelated at first glance, they share a common denominator: event-based contracts, a regulated yet controversial financial instrument offered by companies like Robinhood (NASDAQ: HOOD) and Interactive Brokers (NASDAQ: IBKR).

This explosive mixture—resembling a blend of once-popular binary options, sports betting, and coin flipping—is hailed by enthusiasts as the next revolution in retail trading. Regulators, however, fear it's just a backdoor to gambling.

Who's right? I decided to go straight to the source to find answers to this intriguing question.

What Are Event Contracts?

“Event contracts are an asset class that give investors the ability to trade directly on their opinions about a specific yes-or-no question,” states Kalshi, currently one of the main providers of such instruments, on its official website.

For example, betting on a contract like “Powell out as Chair this year?” could earn you $395 from a $100 investment if you answer “Yes,” while the same amount bet on “No” would yield only $128. Everything depends on the probability of the event occurring, which changes dynamically based on how users vote on the platform.

You can bet on virtually anything: politics, sports, cryptocurrencies, culture, climate change, company results, technological discoveries, and major world events.

“Event contracts have generated high demand because they provide a maximally direct way to get exposure to events that affect businesses, people, and the economy, and they provide the most accurate signal on what the likelihood of future events are,” commented Jack Such from Kalshi, responsible for Business & Media Development, to FinanceMagnates.com.

All this comes with the “blessing” of the CFTC, which Kalshi received in 2020, enabling the launch of the first regulated event contracts exchange over three years ago. The problem, however, is that regulators are no longer looking so favorably on the growing popularity of these instruments, and the bone of contention remains whether some of them are investments or already “gaming.”

A Trillion Dollar Asset Class

Despite the regulatory controversies surrounding event contracts, Such remains optimistic and claims that in 2024, Kalshi's prediction markets showed an “astronomical rate of growth.”

“We are confident that prediction markets will become a trillion dollar asset class,” he added.

His words are also confirmed by Robinhood, which offered its first event contracts in 2024, before the US presidential election. “Our Presidential Election Market was very popular,” Robinhood commented.

“In roughly a week leading up to the election, over half a million people opened a Robinhood account and more than half a billion contracts were traded,” the company added.

How much money is actually in this market? Looking at the largest contracts in terms of volume, they typically attract investments of several tens of millions of dollars. The contract for “Bitcoin price today at 5pm EDT?” is the only one exceeding $150 million. Others, also focused on Bitcoin price, S&P 500, Nasdaq, or Fed decisions, have attracted between $30 and $70 million in trading volume.

It is difficult to obtain more comprehensive data. A year ago, the platform reported a five-fold increase in active users and volume growth of 50%, without providing specific figures.

However, in March, the NCAA “March Madness” basketball tournaments attracted a record $200 million in volume, representing approximately 10% of the total legal betting handle estimated for the NCAA tournaments.

As for Robinhood, although HOOD is a publicly traded company, it doesn't publish separate data for event contracts, which it launched during Q4 2024. From the latest report summarizing 2024, we can see that the “options and futures” assets under custody (AUC) category, which includes event contracts, grew by 120% compared to 2023, from $0.6 billion to $1.8 billion. However, this category encompasses futures, options on futures and swaps, as well as the aforementioned contracts.

However, looking at the popularity of Polymarket—a blockchain-based, unregulated prediction market—it is reasonable to estimate that this industry is either already large or has significant growth potential. Polymarket’s trading volume grew in 2024 from just $50 million to an average of $1 billion per month, peaking at a record $2.6 billion in November during the U.S. election cycle. Over the course of 2024, the total trading volume reached approximately $9 billion, with more than 314,000 active users.

CFTC's Legal Battle with Kalshi Over Political Contracts

The regulation of event contracts in the US dates back to the late 19th and early 20th centuries when “bucket shops” allowed individuals to bet on stock prices without owning shares. Currently, CFTC established clear prohibitions on certain types of event contracts. Specifically, CFTC Regulation 40.11 prohibits contracts that involve or reference terrorism, assassination, war, and gaming activities.

In May 2024, the CFTC issued proposed amendments to further clarify what constitutes “gaming” activities and other prohibited event contracts. The proposed definition of “gaming” would include staking or risking something of value upon specific outcomes or occurrences.

Political event contracts have been particularly controversial. The CFTC has been engaged in a prolonged legal battle with Kalshi regarding this type of instrument. In January, the United States Court of Appeals for the District of Columbia Circuit heard oral arguments in a case centered on Kalshi's ability to list political event contracts for trading.

The dispute began in June 2023 when Kalshi self-certified that its planned Congressional Control Contracts (which allow users to predict which political party would control each chamber of Congress) complied with federal requirements.

Kalshi challenged the CFTC's decision, arguing the regulator exceeded its statutory authority. In September 2024, a district court ruled in Kalshi's favor, finding that the political event contracts did not “involve” either gaming or unlawful activity. The CFTC appealed this decision, leading to the January 2025 oral arguments where the D.C. Circuit expressed “particular discomfort with the CFTC's expansive view of its authority.”

Sports Contracts Also Face Regulatory Pushback

In February, Robinhood and Kalshi were forced to pull their Super Bowl event contracts at the request of the CFTC, just days after announcing their offering. The “Pro Football Championship” event contract would have allowed users to bet on the outcome of the Super Bowl. Despite Kalshi having submitted a request for approval to introduce sports event prediction contracts in January, the CFTC pushed for the contracts to be withdrawn.

When I asked Robinhood about event contracts and the controversies they raise, I was referred to their Policy Paper on prediction markets, published in March.

“Prediction markets can be particularly valuable in fields such as finance, politics, and technology, among others, where decision-makers seek the best possible insights to navigate an unpredictable future,” commented Oliver McIntosh, Senior Product Communications Manager at Robinhood.

At the same time, Crypto.com also withdrew from offering these instruments. Although the company wants to continue offering them in the future and in February its press office commented that “We firmly believe in the legality of our events contracts and believe the CFTC is the appropriate regulator,” they declined to provide FinanceMagnates.com with a more detailed comment on the matter.

Interestingly, just a week after Robinhood and Crypto.com withdrew their Super Bowl contracts, Webull decided to enter this market. Even more curiously, in announcing this decision, they even used the term “binary” event contracts. Can't get much closer to binary options, right?

However, it seems that these firms are confident in their compliance with regulations governing such instruments. Webull, which only recently made its stock market debut, would likely be keen to avoid any unnecessary complications and regulatory hurdles.

Robinhood Carries On Undeterred

In mid-March, Robinhood announced that it was expanding its offering with new prediction markets, allowing speculation on decisions the Federal Reserve might make regarding interest rates or the outcomes of college basketball games. At least initially, with the possibility of expanding the offering over time.

The company confirmed that it is in close discussions with the CFTC and intends to maintain compliance with regulations while expanding the range of instruments offered.

“We have been in close contact with the CFTC over the past several weeks and look forward to continuing to work with them to promote innovation in the futures, derivatives and crypto markets,” commented McIntosh.

Interactive Brokers is also stepping up its game. In early April, the company announced the expansion of its prediction markets offering beyond the United States to include Canada.

And although everyone around claims that everything is in perfect order, the market watchdog sees the matter somewhat differently.

CFTC Has “Serious Concerns”

“The CFTC has serious concerns about FCMs offering access to their customers to any contract that may not be permissible under the law and will exercise its oversight authority to the fullest extent as appropriate,” told CFTC spokeperson.

“FCMs have strict duties and obligations pursuant to the CFTC's customer protection rules and are held to the highest standards to safeguard the public,” the CFTC added, as quoted by Reuters.

State regulators have also gotten involved. As FinanceMagnates.com reported in late March, Nevada, America's gambling capital that earns fortunes from Las Vegas, is also having problems with Kalshi contracts.

“Some Event Contracts Are Structured as Binary Options”

Although event contract providers claim they have nothing to do with binary options, which were banned many years ago in Europe due to their gambling nature, Kalshi confirmed to FinanceMagnates.com that some of them “are structured as binary options.”

However, they can also take a different structure, depending on the type of event the underlying market is based on, “such as events where multiple options can resolve YES.”

“The accuracy and flexibility of these markets makes them a critical tool for managing risk, making the world a smarter and more stable place,” explains Kalshi, defending itself against accusations of offering binary options in a new guise.

While Kalshi is often considered a pioneer in this space, the Chicago Mercantile Exchange (CME) Group—one of the world’s largest derivatives marketplaces—was also among the early players back in 2022. However, the nature of CME’s instruments was purely financial, focusing on end-of-day price movements of key futures markets such as natural resources, currencies, and indexes.

Apparently, regulators view a contract based on the EUR/USD exchange rate differently than one based on the outcome of a sporting event.

For comparison, the blockchain-based Polymarket can offer a wide range of contracts, including those related to gambling, war, or “anything deemed not in the public interest.” Kalshi is “limited” here by the regulator. The question remains, however: wouldn't this regulated instrument still be closer to gambling and binary options than to real investing?