There are two narratives to this debate:
1) Hypocrisy: It is unclear why certain forms of monetary risk taking (ie, horse racing, the stock market, state-sponsored lottos) are legal, while others (ie, normal bets between upstanding adults, online sports betting, games "of chance") are illegal. In fact, if you bite the bullet on the efficient market hypothesis, then all of those markets should probably be illegal in states where the criteria is based on the level of chance.
2) Utility: The wisdom of the crowds, the usefulness of having odds to anchor your own decisions on, the success of corporate prediction markets (with some caveats), etc.
The arguments are more one-sided for the first point, and thus it is perhaps more fun to discuss. The whole family can get involved! Even little Timmy can point out a loophole in this hopelessly complex, quasi-Draconian infrastructure. But unfortunately #2 does not follow from #1, so a discussion of #1 is mostly aimless.
Most of the arguments that I have seen against gambling are for the protection of people from themselves. For example, the second Google result for "why is gambling illegal?" quotes the Bible twice. Even if you accept this paternalistic argument, which I am unsure of both empirically and ethically, you still must admit that there is a potential utility to betting markets. They give us additional data points which we can use to make decisions in a highly uncertain world. So let's reframe the debate on point #2, and discuss it in a data-driven manner.
