Lynnae Williams Journalist
Lynnae is a journalist covering the intersection of technology, culture, and gambling. She has more than five years of experience as a writer and editor, with bylines at SlashGear and MakeUseOf. On the iGaming side,...
Read Full BioLawmakers in Hawaii introduced legislation on Monday that would make prediction markets illegal under the state’s gambling laws.
As one of the few states where almost all forms of gambling are still illegal, lawmakers are now taking aim at prediction markets. Under House Bill 2198, financial speculation on real-world events would be classified as illegal gambling. If passed, it would take effect on July 1, 2026.
The bill would close a gambling loophole that allows prediction markets to offer financial products that work like bets but are structured as securities or commodities. The bill would make it clear that wagering on events such as “athletics, politics, catastrophe, and death,” as well as other real-world outcomes, is illegal gambling.
The move comes as prediction markets like Kalshi and Polymarket are embroiled in legal battles across several states, with U.S. regulators arguing that their products bypass local gambling laws.
Closing the ‘Commodities’ Gap
The legislation would modify Hawaii’s current definition of gambling. The state law currently says, “Gambling does not include bona fide business transactions valid under the law of contracts, including but not limited to contracts for the purchase or sale at a future date of securities or commodities…”
As written, the state can’t take action against prediction markets because they don’t fall under the statute’s definition of gambling. HB 2198 would change that by updating the law to prohibit contracts that relate to real-world outcomes beyond a person’s control or influence.
According to the bill’s text, lawmakers believe the contracts that prediction markets offer “violate moral and ethical standards, but they also prey upon a gap in Hawaii’s gambling laws that permit contracts for the purchase and sale at a future date of securities or commodities.”
The bill specifically targets contracts related to:
- Sports: Outcomes related to athletic events.
- Contests: Outcomes based on skill, merit, or chance.
- People: Events happening to natural persons.
- Politics: Elections or government actions at any level.
- Catastrophe: War, disasters, terrorism, or public health crises.
- Death: Outcomes related to assassination or mass casualty events.
Prediction market operators have argued that they are not subject to state gambling laws because their products are regulated at the federal level by the Commodity Futures Trading Commission (CFTC). If HB 2198 becomes law, it will likely set the stage for another legal battle over whether states or the CFTC has jurisdiction over these platforms.
Hawaii’s Zero-Tolerance Gambling Stance
The push for legislation to ban prediction markets aligns with Hawaii’s zero-tolerance stance on gambling. Hawaii and Utah are the only two states in the nation where absolutely no form of gambling is legal: no lottery, no casinos, and no sports betting.
However, the state is currently wrestling with how to handle the thriving underground gambling market that moves an estimated $700 million to $800 million annually. While HB 2198 seeks to stop prediction markets from operating in Hawaii, a separate 24-member Tourism and Gaming Working Group has been formed to study how the state could potentially legalize gambling.
The working group, composed of law enforcement and industry representatives, has been tasked with researching the illegal market and making recommendations to the legislature by the end of the year.
Hawaii is one of many states taking action against prediction markets. Lawmakers in New York have introduced the ORACLE Act, which would ban most event contracts offered by these platforms, including those related to sports, politics, catastrophes, death, and financial markets. Regulators in Massachusetts, Nevada, and several other states are fighting prediction markets in court, seeking to block them from operating in their jurisdictions.
Hawaii’s proposed ban on prediction markets comes after a bill to legalize sports betting failed last year after disagreements over tax rates and revenue allocation.
