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Prediction Markets act the same way as Gambling Exchange - the assets are denominated as both sides of the book minus the spread.

What collateral is underlying the massive, state-sponsored, Spanish lottery ticket and scratch off racket?

I don't think you'd find anyone arguing that the lottery isn't gambling, so I'm not sure what argument you're trying to make here.

A casino is by definition a house that takes rake and is not the government or one of its subsidiaries ...

Collateral is not uncommon in gambling (e.g. pink slips). That does not seem to distinguish gambling from speculating.

That's not collateral, that's the thing being wagered.