Una Mullally: Betting on elections and matches is one thing. Gambling on war is something else entirely

The Gambling Regulatory Authority of Ireland (established under the Gambling Regulation Act 2024) faces a rapidly expanded prediction-market landscape that has produced material single-market volumes (e.g., $12.5M on a US-aliens-by-2027 market, Polymarket quotes of $0.23 and $0.69 on hypothetical US military entry events, and ~$125k trading on the Dublin-Central by-election with ~$80k tied to one candidate). Kalshi won a US lawsuit and operates in fiat, Polymarket is pursuing US regulatory approval after acquiring a holding company and has noted VC ties, highlighting growing legal and regulatory frictions. The piece flags reputational and ethical risks from markets that trade on war, elections and tragedies, implying potential sector-level regulatory action rather than broad market impact.

Analysis

Regulatory fragmentation will be the dominant market force: jurisdictions that clamp down will push high-risk volumes onto crypto rails and offshore venues, while places that create a clear, fast licensing path will attract incumbent financial infrastructure to offer regulated event contracts. Expect a 20–40% shift in new-event volume within 6–18 months in jurisdictions that announce decisive rules, producing a winner-takes-some dynamic for exchanges and market-makers that move quickly to productize event contracts.

The immediate commercial opportunity is fee capture and data monetization, not gross-handle parity with sportsbooks. If a regulated exchange can capture even $1–3bn of annual notional in event contracts, conservative fee take of 5–10% of handle would translate to $50–300m of incremental revenue — enough to move multiples for mid-cap exchange operators. Conversely, incumbents who rely on low-margin customer acquisition will face higher compliance and content-moderation costs, compressing EBITDA margins by several hundred basis points unless they reprice.

Second-order operational risks matter: merchant acquirers and ad platforms will face higher chargeback, AML and reputational risk, forcing stricter KYC and delisting decisions; CAC could rise 20–40% for digital-native gambling brands as paid distribution tightens. Separately, the data-integrity problem (news/sources altered under betting pressure) elevates liability for publishers and increases the value of provenance/forensics vendors.

Catalysts and tail risks are binary and fast-acting — court rulings, a high-profile misuse incident, or coordinated government bans can shutter markets in days and reverse flows. The path to normalization runs through regulatory productization (licensed event contracts on regulated exchanges) or back-end fragmentation into noncustodial DeFi venues; hedge sizing and option structures should reflect those two divergent outcomes over 3–18 months.

Key Decisions for Investors

• Overweight CBOE (CBOE) — 12–18 month hold. Buy shares or 1.5x exposure (or small call spread) to express capture of regulated event-contract fees; target 15–25% upside if CBOE secures product listings, downside ~10% if volumes stay offshore. Position size: 3–5% of liquid equity sleeve.
• Buy CME Group (CME) — 12 month horizon. Enter via outright shares or buy a 12-month call spread to limit premium; thesis is fee and clearing revenue from regulated event/derivative launches. Risk: regulatory fragmentation keeps flow out of cleared venues; reward: 12–20% realized upside into catalyst windows (rule approvals, product launches).
• Call-spread on Coinbase (COIN) — 6–12 months. Buy a moderately OTM call and sell a higher strike to express incremental crypto trading volume as markets migrate to on-chain rails; structure to cap premium outlay. Downside: material US regulatory enforcement; upside: 2:1 reward if crypto-native transaction volume rises 25–50%.
• Pair trade — short DraftKings (DKNG) / long CBOE (CBOE) equal-dollar, 6–12 months. Tail-risk of reputational and advertising restrictions raises customer-acquisition costs for consumer sports/gaming names; regulated exchange fee capture benefits. Target 10–15% relative outperformance; stop-loss if DKNG outperforms by 8% over 30 days.