What is the difference between prediction markets and online gambling?

In the United States, prediction markets are not classified as online gambling mainly based on how regulators view them. Frankly, the difference between the two is more than just their names.

First, look at the purpose. The core of prediction markets is price discovery and information aggregation—that is, reflecting the most likely outcome of an event through participants' trading behavior. You're buying and selling predictions about the future, not just relying on luck. Gambling, on the other hand, is primarily for entertainment or the direct aim of winning money, relying on randomness and probability.

Second, consider the structure and operational logic. Prediction markets have clear target events, transparent rules, and post-event verification mechanisms. Participants can see real-time prices and trading depth. Traditional online gambling usually involves a bookmaker setting odds, with participants betting against the house.

Finally, look at the regulatory attitude. The US CFTC grants exemptions or recognition to certain compliant prediction market platforms because they are viewed as social value information tools. But this line is also changing— as prediction markets become more popular, it's hard to say when this boundary will blur.