Fragmented Rules, Modular Systems: How Prediction Markets Are Rebuilding Compliance

In a wide-ranging conversation with Gaming Eminence, Xpoint CEO Manu Gambhir dissects the mounting regulatory labyrinth surrounding prediction markets, highlighting the critical role of geolocation in navigating fragmented state and federal frameworks. Manu underscores how emerging event-contract platforms must architect modular compliance systems to withstand high-velocity verification demands. Beyond regulatory imperatives, advanced geolocation supports fraud prevention, dynamic exclusion zoning, and behavioural analytics, strengthening operational stability and regulatory credibility.

Gaming Eminence: What makes regulation around prediction markets particularly complex right now—and how does geolocation fit into the broader compliance equation?

MG) Hundreds of millions of dollars were bet on the 2024 election, with many Americans using offshore sportsbooks due to US restrictions. Polymarket, an online betting platform unavailable in the US, saw over $3.6 billion in election bets.

Regulating prediction markets is challenging because they blend aspects of finance, gambling, and information exchange. Multiple authorities, including the Commodity Futures Trading Commission (CFTC) and various state gaming commissions, have differing approaches and jurisdictions. This complexity often forces operators to decipher conflicting rules and navigate a patchwork of regulations.

In early February, the CFTC announced that a public roundtable concerning sports-related prediction markets would be held in approximately 45 days.

Some U.S. state gaming regulators are reacting to the rise of prediction markets.  For instance, Massachusetts is seeking to ban betting or wagering on political outcomes. At the moment, there is no specific rule prohibiting election betting in Massachusetts. However, any operator that tries offering odds on such a market must first gain approval from the Massachusetts Gaming Commission. Election betting is not explicitly prohibited in Massachusetts, but operators must seek approval from the Massachusetts Gaming Commission. Indiana and Oregon are exploring similar measures. 

Nevada, recognised for its strict gaming regulations, issued a cease-and-desist order to prediction market operator Kalshi in March. Massachusetts has launched a probe into Robinhood’s event contracts for March Madness.  

As a result, geolocation technology becomes critical in this scenario by accurately identifying user locations to ensure participation only occurs in permitted jurisdictions. By fusing GPS, Wi‑Fi, IP, cellular, and motion data, multi‑point geolocation closes accuracy gaps in border and gray‑zone areas, minimizing false denials, reducing jurisdictional friction, and ensuring users can only participate where regulation allows. This is essential, particularly near jurisdictional borders, where accuracy is crucial to avoiding compliance issues. At scale, even a momentary geolocation outage can lead to regulatory fines, revenue loss during peak events, and damage to user trust. By delivering consistently precise, always-on-location checks, multi‑point geolocation helps operators avoid compliance lapses and maintain uninterrupted service under the highest traffic loads. 

Gaming Eminence: In your view, how do compliance demands for emerging prediction market formats diverge from those in traditional betting ecosystems?

MG) Emerging prediction markets typically fall under the oversight of the CFTC, a federal agency responsible for regulating derivatives markets in the United States, including futures, swaps, and event-based contracts. When prediction markets allow users to speculate on outcomes like political elections or economic trends, the CFTC often categorises these as ‘event contracts’.

Many prediction market operators demonstrate compliance with CFTC guidelines by adhering to rules regarding market structure, such as limits on trader participation or position sizes. For example, platforms like PredictIt previously operated under a ‘no-action letter’, meaning the CFTC agreed not to enforce actions against them as long as certain conditions were maintained. However, the CFTC actively monitors compliance, and violations can result in enforcement actions or fines.

Recent years have seen increased CFTC enforcement, including cases against platforms offering unauthorised event contracts. Unlike traditional betting, which is primarily regulated at the state level, prediction market operators must often navigate both state gaming statutes and federal CFTC event‑contract rules, creating a patchwork of overlapping requirements. The patchwork of state‑by‑state laws and CFTC mandates is driving operators to reinvent their compliance stacks as modular, policy‑driven architectures, capable of dynamic geolocation checks, user segmentation, and on‑the‑fly rule updates. For example, a plug‑and‑play approach lets operators activate or retire jurisdiction‑specific modules in hours rather than rebuilding their entire system. During high‑stakes moments, whether an election night or a major sports final, operators must process up to hundreds of thousands of location verifications per minute without delay, all while meeting stringent accuracy requirements or risking regulatory penalties. This balancing act demands infrastructure engineered for scalability, sub‑second checks, and seamless failover so platforms can uphold both user experience and legal compliance under extreme load.

Gaming Eminence: Beyond the obvious role of location verification, what deeper operational advantages can geolocation unlock for prediction market operators?

MG) While geolocation is fundamentally about ensuring compliance, it also provides significant operational advantages for prediction market operators. Advanced geolocation technology helps in identifying and preventing fraud by detecting suspicious user activities, such as unrealistic location changes indicating possible account compromise or unauthorised access attempts from prohibited areas.

Industry‑leading geolocation solutions enable operators to enforce standards that go beyond basic legal requirements, such as dynamic exclusion zones around schools, treatment centers, and other sensitive locations, as well as automated self‑exclusion programs. These capabilities help platforms proactively protect vulnerable populations and show a genuine commitment to responsible gaming. Geolocation data also provides a rich behavioral dataset, revealing patterns like peak play times in specific venues or regional preferences that operators can leverage to fine‑tune product‑market fit and design more responsible engagement models.

Gaming Eminence: What role can geolocation play in helping operators navigate gray areas—places where regulation lags behind innovation?

MG) Geolocation technology is particularly useful in regions where regulations remain unclear or are still developing. Operators can strategically restrict or enable user access based on current regulatory guidance, effectively demonstrating proactive compliance.

Swift regulatory changes, whether temporary bans on political event contracts or state‑run trials of new betting formats, demand real‑time geographic response infrastructure. Leading compliance providers now deliver boundary management that can enact or remove exclusion zones in minutes, ensuring operators stay ahead of shifting rules without interrupting service. Furthermore, analysing geolocation data from restricted areas can provide insights into potential market demand, informing responsible and data-driven engagement strategies with regulators and stakeholders.

This flexibility not only helps avoid compliance pitfalls but also signals to regulators and lawmakers that operators are proactive partners, earning credibility and goodwill during pilot rollouts and regulatory reviews.

Gaming Eminence: Where do you see the intersection of geolocation and consumer trust—can this tech play a larger role in shaping user safety and transparency in emerging markets like predictions?

MG) Reliable geolocation significantly contributes to consumer trust in prediction markets by ensuring that platforms operate transparently and in compliance with jurisdictional laws. Users gain confidence when they see clear enforcement of geographic restrictions, reassuring them about the platform's legitimacy and responsibility.

Geolocation also enhances user safety by identifying and preventing fraudulent account access attempts, such as suspicious location logins. Operators walk a fine line between enforcing strict location checks and preserving a seamless user journey; industry leaders are addressing this by deploying adaptive verification strategies, such as trust‑based networks, and context‑aware check intervals that uphold compliance without introducing unnecessary friction.