Home / Play / Is ProphetX’s shift to a prediction market exchange a further sign that online sweepstakes gaming has run its course in the United States?

Is ProphetX’s shift to a prediction market exchange a further sign that online sweepstakes gaming has run its course in the United States?

Derek Helling

Legal Writer

Publish Date: Jun 12, 2026

Fact checked by: Matt Moreno

Key Points

ProphetX has secured regulatory approvals from the U.S. federal government to offer event contract trading online.
The platform currently operates on a sweepstakes-based, peer-to-peer model.
U.S. states are increasingly cracking down on sweepstakes gaming while federal support for prediction markets ramps up.

There is something to be said for exiting a sinking ship in the early stages of that submergence. However, whether the decision to jump ship was wise will ultimately be judged by where the exiting party escapes to.

ProphetX, a sweepstakes-based, peer-to-peer sports gaming platform, is nearing completion of the migration of its service from sweepstakes gaming to a prediction market exchange. The move comes as more U.S. jurisdictions are pushing sweepstakes websites outside of the framework of permissible gaming and the United States government is digging its heels in on defending prediction market exchanges.

(Photo by Karl-Josef Hildenbrand/picture alliance via Getty Images)

However, the future for prediction markets could turn sour quickly if litigation proceeds favorably for state and tribal governments. Additionally, procedural issues could hamper the legitimacy of sports event contract trading.

Ironically, the sweepstakes model could merit a second look if the status quo drastically changes for sports trading on prediction markets.

ProphetX receives crucial regulatory approvals for prediction market launch

On Thursday, ProphetX announced that it received approvals from the U.S. Commodity and Futures Trading Commission (CFTC) to operate a designated contract market and a derivatives clearing organization. ProphetX initiated the process in December after sharing in November that it planned to build out its exchange, focusing on trading designated contract markets (DCMs) connected to sporting events.

That sports-first emphasis for the forthcoming exchange signals that the mechanics behind its product for gamers will be changing, but much of the user experience will remain similar.

How ProphetX will change in the near future

Currently, ProphetX allows people to risk digital currencies against each other on predictions connected to sporting events. ProphetX acts as the facilitator of the proposition and has no interest in how the wager between users plays out.

ProphetX makes its money through sales of the digital currency packages. It’s a dual-currency system in which users can buy one form of currency that cannot be redeemed for prizes and as a bonus, they receive a separate currency that cannot be directly purchased but which may be exchanged for prizes including cash.

Users must satisfy a playthrough requirement with the “Prophet Cash” before they can exchange it for cash or other prizes. There will be some similarities when ProphetX converts to a prediction market.

For example, ProphetX stressed in the Thursday press release that it still intends to focus on markets related to sporting events with its new predictions exchange. At the same time, the prediction market model has significant differences.

On its exchange, ProphetX will post markets based on a certain premise related to a sporting event. Users can buy contracts related to whether they believe that, yes, that premise will occur, or no, the stated circumstances will not play out.

The price of the contracts moves as users buy, sell, and trade their positions. When the sporting event resolves, so do the markets, and the people who bought contracts on the winning side get paid according to the price they got into the market at.

In both models, ProphetX is a platform where people can back up their sports predictions with money online. The prediction market framework has some clear legal advantages to sweepstakes at this time.

Why sweepstakes gaming is an increasingly daunting prospect in the US

In regulatory terms, the gap between sweepstakes gaming and prediction markets is currently Grand Canyon-sized. Sweepstakes gaming platforms are subject to an array of federal, local, and state laws with several bodies having a hand in oversight on some level.

Increasingly, those local and state laws are becoming hostile to online websites that offer casino-style gaming or sportsbook-like experiences with dual-currency systems to award prizes. Over the past two years, eight U.S. states have enacted new statutes restricting that activity. Gambling regulators and law enforcement have taken actions against companies offering sweepstakes gaming online in several other states as well.

Because of that, sweepstakes websites have lost access to millions of potential players and the map could shrink further if failed bills see greater success in future years. The status quo for prediction markets is far more favorable at this time.

Prediction markets enjoying the backing of the US government

While sweepstakes casinos face compliance issues with a patchwork of jurisdictional standards, the federal government in the U.S. has insisted that it is the only body with authority over prediction markets. The CFTC has expended significant resources to reinforce that point, too.

The CFTC has sued six state governments that have attempted to take enforcement actions against prediction market exchanges. Additionally, the CFTC has filed amici briefs to support exchanges like Kalshi in their lawsuits against other states.

These disputes have focused on contracts connected to sporting events, which state governments have alleged violate their gambling laws. That fact makes ProphetX’s future especially reliant upon favorable outcomes in ongoing litigation around the U.S. and friendly CFTC oversight.

CFTC regulations on trading sports DCMs have one glaring weakness

On Wednesday, the CFTC shared its latest draft rules governing prediction market exchanges, clarifying what DCMs may and may not consist of in terms of sporting events. The proposed rule disallows any contracts connected to injuries or officiating along with some other parameters, as two examples.

However, the process in which these draft rules were formed is ripe for a legal challenge. The CFTC currently consists of just one person, Chair Michael Selig, rather than the full allotment of five commissioners. Therefore, the regulations that Selig has individually proposed, if they become final, could easily be challenged under the U.S. Administrative Procedure Act. That statute may render null any regulations the CFTC puts in place until the commission is full.

Resulting uncertainty in oversight regarding trading sports DCMs will do the CFTC and exchanges no favors in court cases challenging the exchanges’ ability to offer those contracts. The U.S. Supreme Court seems bound to get involved at some point, and that opinion could put ProphetX in a precarious position.

Supreme Court appeal already in the works

An appeal to the U.S. Supreme Court is already in the works in a case between Kalshi and New Jersey officials. More could be on the way, as there have been related opinions out of the Sixth and Ninth circuit courts of appeal with cases in other circuits pending.

The Third Circuit in the New Jersey dispute and the Sixth Circuit have issued differing opinions on several points, like whether federal law preempts state gambling laws in the context of trading sports DCMS. That creates an important circuit split pivotal to the Supreme Court taking up a case.

Before the Court will likely be questions like whether trading sports DCMs is functionally identical to sports wagering and whether the CFTC indeed has sole jurisdiction over DCM trading to the exclusion of state governments. A ruling that comes down forcefully on the side of state governments would not just rain on ProphetX’s prediction platform parade.

It would flood those parade grounds.

Unfavorable ruling could put ProphetX in unenviable position

If the Supreme Court opines that trading sports DCMs is wagering on sports subject to state laws, ProphetX, more than other prediction market platforms, would especially be in a precarious position due to its heavy emphasis on sports. Platforms like Kalshi also offer trading of contracts related to politics and popular culture outside of sports.

In such a scenario, ProphetX would be back in the position of its product being subject to a patchwork of state gambling laws, some of which would make its platform illegal in the biggest population centers in the U.S. In that instance, returning to a sweepstakes model might be preferential, especially in light of the sour attitude that many state officials could have toward prediction market operators after months of litigation.

That’s all hypothetical at this point, however. A Supreme Court decision favorable to the CFTC and exchanges could give ProphetX firm legal footing for years to come.

That’s why ProphetX isn’t the only sweepstakes company at least kicking the tires on a transition to the prediction market model.

Novig could follow ProphetX into predictions space

Novig is another sweepstakes-based sports prediction platform with interesting overtures toward making the same transition, or at least diversifying its assets to include a prediction market product. In January, Ludlow Exchange filed for regulatory approval with the CFTC, and Novig is the holding company for Ludlow Exchange. Ludlow Exchange formerly operated in Colorado and New Jersey with a traditional sports wagering license under the name Sporttrade.

The migration of Novig and ProphetX to a prediction market model could drastically reduce the presence of sweepstakes-based sports platforms in the U.S. Sweepstakes-based casino platforms, though, are another matter.

Prediction markets less feasible for casino games

Trading contracts related to baccarat, blackjack, craps, roulette, or slots has a far murkier path forward compared to sports DCMs currently because of logistical and regulatory issues. For starters, the draft rules submitted by the CFTC on Wednesday would ban such trades.

Contracts related to poker events might be an exception, but that could be another matter that the courts would have to adjudicate. Again, though, the fragile nature of the proposed CFTC rules creates uncertainty that operators may not want to take risks around.

Even if regulations permitted, the logistics of constructing contracts around casino games are problematic and could be cost-prohibitive. Exchanges would need to consider parameters like which games to base contracts on and how to provide confidence to users that results are verifiable.

That may mean that the sweepstakes casino model has more staying power than the sweepstakes sports product. However, any of these options includes a level of risk for companies like Novig and ProphetX right now.

The sweepstakes model carries a threat that at any time, a state government could legislate your product out of legal compliance. The prediction markets model is just one Supreme Court ruling away from the same end in terms of sports, though.

ProphetX has chosen to back the prediction markets model at this juncture. If its gamble pays off, it probably won’t be the last company to jump ship from sweepstakes gaming.

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