How a disputed $1 billion claim became a powerful weapon against prediction markets
On the American Gaming Association’s web site, a counter has been climbing for months, tallying what the casino-and-sportsbook foyer says states and tribes have misplaced to prediction markets. On Thursday, it rolled previous $1 billion, and the AGA moved quick to make a headline out of it, with President Bill Miller occurring CNBC to warn that states and tribes have been dropping cash that might in any other case fund group packages.
Platforms like Kalshi and Polymarket let folks commerce contracts on real-world outcomes, and a fast-growing share of that exercise quantities to sports activities betting by one other route, with customers shopping for yes-or-no positions priced like odds on questions akin to who wins Sunday’s recreation.
Because the Commodity Futures Trading Commission (CFTC) regulates them on the federal degree, these platforms have been capable of function in all fifty states, together with those the place conventional sportsbooks are closely restricted or outright banned. State officers have spent greater than a 12 months insisting that the contracts are playing, and that they need to stay below the identical licenses, guidelines, and taxes each authorized sportsbook already pays.
The assertion that these platforms led to a billion {dollars} of misplaced tax income boils a dense jurisdictional struggle all the way down to one thing the common voter can simply grasp.
However, it additionally comes at a fairly inconvenient time for the playing business within the US, because it simply closed out its finest 12 months ever, producing $78.72 billion in income and a report $18.09 billion in gaming taxes for 2025.
One of essentially the most worthwhile industries in America is at present the one telling Congress that it is being robbed. The AGA exists to signify the casinos, sportsbooks, and tribal operators who already pay into the state system that prediction markets are accused of skipping, which is a part of why its estimate carries political weight.
The platforms, for his or her half, dismissed the determine as fabricated, with Kalshi calling it “faux math from casinos” which might be anxious about dropping their monopoly, whereas the Coalition for Prediction Markets dismissed the estimate by saying the AGA’s underlying sources could not be situated.
The argument against prediction markets
The states have been having a laborious time getting folks on board with their philosophical case against prediction markets. Court rulings in virtually each prediction market case have been break up, and the CFTC retains siding with the platforms in each new case that is introduced earlier than regulators. CryptoSlate has beforehand covered the jurisdiction struggle between US states and the CFTC, and there appears to be no finish in sight for the continued battle.
A greenback determine does an finish run round all of that, particularly when it is over a billion {dollars}, as a result of governors, attorneys basic, and all types of regulators and lawmakers can level straight at training funds, pension contributions, and responsible-gaming packages and inform voters that is the place the billion is siphoned from.
The scale of the playing market is finest seen in New York, which taxes on-line sports activities betting at a 51% price, the best within the nation. Despite the insanely high tax price, the state pulled in roughly $1.3 billion from it in 2025.
The Federal authorities already collects a 0.25% excise tax on authorized sports-betting deal with, which AGA argues exists to focus on unlawful bookmaking. Given the insane revenues playing corporations report, even this teeny tiny tax represents a vital income stream for the federal government. This implies that we’re unlikely to see any form of significant help for prediction markets coming from Washington, so the business must take its possibilities on the state degree.
Lawmakers gave the impression to be anticipating that: in March, Senators John Curtis and Adam Schiff launched the Prediction Markets Are Gambling Act, a bipartisan invoice that might bar any CFTC-registered venue from itemizing a contract resembling a sports activities guess or a on line casino recreation. The strain has been constructing on the company from the states as nicely, with 41 attorneys basic from throughout the political spectrum urging the CFTC to retreat from what they describe as regulatory overreach.
The misplaced tax income is a slam dunk to place in entrance of voters, however it’s simply a part of a for much longer checklist of considerations that embody shopper security, recreation integrity, and who will get to regulate playing within the first place. When somebody locations a guess via a licensed sportsbook, a entire equipment of state oversight comes hooked up: a criticism course of if a payout goes sideways, responsible-gaming safeguards, and monitoring designed to flag match-fixing or insider exercise. Those protections attain the federally regulated platforms solely on the edges, in the event that they attain them in any respect.
There’s additionally the issue of tribal sovereignty, as a result of many states handed tribes unique gaming rights via negotiated compacts that prediction markets step round fully. By now, it is grown heated sufficient that the playing business has begun splitting against itself, and it is pulled the White House immediately into the center of issues.
The fracture contained in the playing enterprise
This is such a advanced drawback that the business can not seem to maintain one place.
DraftKings and FanDuel each resigned from the AGA in November, with Fanatics strolling out in December after launching its personal event-contract platform, all of them drawn by the best way federally regulated contracts allow them to attain clients in states their typical sportsbooks cannot.
The incumbents defending the state-regulated mannequin and the operators chasing the federal route at the moment are pulling towards reverse outcomes. This leaves the AGA representing a thinning coalition of land-based casinos and tribal operators against a new wave of corporations that used to take a seat at its personal desk.
The political discourse escalated this week as nicely, when President Trump posted on Truth Social that it was “critically essential” for the CFTC to maintain unique authority over prediction markets, a place sophisticated by his son Donald Trump Jr.’s paid advisory position at Kalshi and his funding in Polymarket.
The administration has been litigating laborious to again that view, with the CFTC suing Arizona, Connecticut, Illinois, New York, Wisconsin, and Minnesota. Minnesota lately became the primary state to move an outright ban on prediction markets below a invoice signed by Governor Tim Walz, prompting a federal lawsuit geared toward blocking it earlier than it takes impact on August 1. Minnesota’s legislation is a part of a a lot broader push, with at the least 15 states having launched laws this 12 months to rein within the platforms.
But beneath all of that political motion and authorized noise lies the rationale why prediction markets matter in any respect: sheer quantity. Monthly prediction-market buying and selling climbed from round $1.2 billion in early 2025 to greater than $20 billion by early 2026. It’s an unparalleled development price, even within the crypto business, and it led to a $2 billion investment from Intercontinental Exchange into Polymarket, valuing the corporate at $8 billion.
The American gaming business posted report income, asking Congress and the courts to deal with a billion-dollar estimate, one which the platforms dismiss as invented, as a public emergency. Prediction markets got down to win therapy as monetary exchanges, whereas the AGA is working laborious to recast them as untaxed sportsbooks, a struggle many anticipate will attain the Supreme Court.
Whichever manner that goes, the subsequent part will play out within the locations the affiliation retains pointing towards, the statehouses, attorney-general places of work, tribal governments, and congressional committees now watching a fast-growing market develop nicely past their attain.
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