Smarkets is a betting exchange, meaning people bet against each other instead of against a company that sets the odds.
Now it wants a much bigger U.S. footprint, and it is trying two doors at once. In March, Smarkets applied to the Commodity Futures Trading Commission, or CFTC, for a license to run a prediction-market exchange.
Those markets let people wager on real-world events, like who wins an election or how a sports season ends. Smarkets is also waiting on sportsbook licenses in Illinois, Iowa, and Michigan.
A sportsbook is the part of a betting operation that takes wagers on games. The company already runs one in Indiana.
Jason Trost calls the two-track plan a hedge, meaning a backup plan. "We view it more as a hedge rather than we want to be active on a state level. You know, our preference is to be active on the federal level," he said.
The hedge exists because the law is not settled. "The reason we're doing the dual track is because the legal situation is unclear if the CFTC has federal preemption or not," Trost said.
Simply put, preemption means federal rules override state rules. Whether a state can still call a federally approved exchange illegal gambling is an open question.
A growing number of states view prediction markets as illegal gambling or unlicensed sports betting. Illinois and Michigan, where regulators classify prediction markets as unlicensed sports betting, are part of that group.
In July, 44 state attorneys general told the CFTC that it cannot be the sole regulator of sports-related event contracts on exchanges. The CFTC has sued several states to keep them from regulating prediction platforms on their own.
Rival prediction-market company Kalshi has also been in the middle of the fight. It called New York's July lawsuit against it "political theater," and got the case thrown out.
Each state license comes with its own compliance and tax costs, and Smarkets has to absorb those. Trost said the company's experience in four European countries, including the UK, Ireland, Malta, and Sweden, prepared it for that patchwork.
Smarkets is not the first company to chase both. DraftKings and FanDuel launched prediction markets late last year.
Flutter, the owner of FanDuel, said on an earnings call last week that its prediction market could add customers faster in states where sportsbooks face scrutiny.
People have traded more than $60 billion on Smarkets. Investment firm Susquehanna backs the company.
The platform has brought in more than $1.2 billion so far this year.
Trost says sports are a major driver of that volume, just as they are for Kalshi and Polymarket. That is why the company keeps one foot in sports and one in broader prediction products.
His preferred route is still federal. He wants sports-event contracts treated as swaps, meaning financial contracts already regulated by the federal government.
He also had a warning for the industry. Without naming names, he said some competitors are "in danger of ruining the reputation of this industry" because they are not following regulation closely enough.
He wants Smarkets to be the "good actor."
For investors, this is more than a fight over who approves betting platforms. It decides how much of a company's revenue becomes profit and how many markets it can offer without carrying a stack of state-specific costs.
If you own shares of DraftKings, Flutter, or any company with a prediction-market product, these lawsuits and license filings are part of your stock's story. The rules that win will determine how big that cost is.
So the bigger question for your portfolio isn't which company files first. It's which set of rules gets to last.