Smarkets Eyes Iowa Expansion With Prediction Market, Sportsbook Push
London-based betting exchange Smarkets is positioning itself for a major U.S. expansion, with Iowa on its radar as it seeks federal approval to operate a prediction market and pursues state sports betting licenses in the Midwest.
CEO Jason Trost told Covers that the company, which has processed more than $50 billion in lifetime trading volume since 2009, is in constant communication with the U.S. Commodity Futures Trading Commission (CFTC) as it seeks a designated contract market (DCM) license. That designation would allow Smarkets to operate what is commonly known as a prediction market, where users trade yes/no contracts on everything from elections to sports events.
What is a prediction market and how does it work?
Prediction markets allow users to buy and sell contracts that pay out based on the outcome of a specific event. For example, a contract might ask whether a particular candidate will win an election or whether a team will win a game. The price of the contract fluctuates based on supply and demand, effectively creating a real-time probability.
Trost argues that prediction markets and betting exchanges are fundamentally the same thing, just with different names.
“The important thing to know is that a betting exchange and a prediction market are exactly the same thing,” Trost said. “They're just different words for the same thing.”
Why is Smarkets pursuing both federal and state licenses?
Smarkets is taking a dual-track approach in the U.S. While it seeks CFTC approval for a federally regulated prediction market, it is also pursuing state-level sports betting licenses for its SBK sportsbook product. The company is currently live in Indiana and is eyeing additional states, including Illinois, Iowa, and Michigan.
This strategy serves as a hedge against potential legal challenges. Multiple state gambling regulators are contesting the legality of sports event contracts offered by prediction markets, arguing they constitute unlicensed sports betting. If courts side with state regulators, it could eliminate a significant portion of prediction market business.
Trost said he supports the CFTC's position that prediction markets fall under federal jurisdiction, but he wants to be prepared for any outcome.
“I think that the CFTC has the legal jurisdiction over (prediction markets),” Trost said. “But in the case where it's ultimately ruled that they don't, or the CFTC changes their mind, we want to be active in the American market.”
What would Smarkets bring to Iowa bettors?
Trost believes Smarkets' 15-plus years of experience operating in regulated markets abroad gives it a significant edge over newer U.S. competitors like Kalshi and Polymarket.
“I think a lot of the new guys in the United States, they're kind of throwing a bunch of stuff against a wall and seeing what's going to stick,” Trost said. “But we've had all those learnings already, so we can do a lot less, in some cases, irresponsible experimentation, and more focus on best prices, lowest transaction fees, uptime, stability with the exchange, just doing the core really well and the regulation really well.”
The company also plans to launch with a refreshed, user-friendly interface designed to appeal to newcomers, not just exchange veterans.
“The big thinking behind the current interface is that anybody who likes trading anything should be able to look at this, understand what's going on, and be able to use it,” Trost said.
What about horse racing in the U.S.?
Iowa horse racing fans should not expect Smarkets to offer equine markets anytime soon. While horse racing is a critical product in the U.K., the company has no immediate plans to offer it in the U.S. due to a complex regulatory environment, including federal laws specific to horse race wagering.
Trost said he would “love” to someday offer the sport, arguing that prediction markets could dramatically reduce the high margins bettors currently pay on horse racing.
“Horse racing is a classic industry where they have a regulatory advantage position. There's not enough competition, and ultimately, consumers will pay 10, 20, 25% margin to place a bet on horse racing when it should be one or 2%,” he said.
What does this mean for Iowa consumers?
If Smarkets secures both its federal DCM license and Iowa state sports betting approval, Iowa residents could see a new option for both prediction market trading and traditional sports betting. Trost argues that a federally regulated model is ultimately better for consumers than state-by-state regulation, which he says passes higher costs down to bettors.
The timeline for CFTC approval remains unclear. Trost said he has no “visibility” on when a designation might come but described the discussions as going well.
“We're in constant communication with them, talking about our application,” he said. “We're following the process that they've laid out, and we're working expeditiously with them to get the designation.”
For now, Iowa bettors will have to wait and see whether Smarkets becomes the next major player in the state's growing sports betting market.
Frequently asked questions about Smarkets' U.S. plans
Is Smarkets already operating in Iowa?
No. Smarkets' SBK sportsbook is currently live only in Indiana. The company is pursuing licensure in additional states, including Iowa, but has not yet launched there.
When will Smarkets launch its U.S. prediction market?
The timeline depends on CFTC approval. Trost said the company is working expeditiously with the regulator but has no specific date for a decision.
Will Smarkets offer horse racing in the U.S.?
No immediate plans. The company cites the complex U.S. regulatory environment for horse racing as the reason, though Trost said he would like to offer it in the future.