On the American Gaming Affiliation’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 Invoice Miller happening CNBC to warn that states and tribes have been shedding cash that might in any other case fund group packages.
Platforms like Kalshi and Polymarket let individuals 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 corresponding to who wins Sunday’s recreation.
As a result of the Commodity Futures Buying and selling Fee (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 dwell beneath 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 battle all the way down to one thing the typical voter can simply grasp.
Nevertheless, it additionally comes at a reasonably 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 the vital worthwhile industries in America is at present the one telling Congress that it is being robbed. The AGA exists to symbolize 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 “pretend math from casinos” which are anxious about shedding their monopoly, whereas the Coalition for Prediction Markets disregarded the estimate by saying the AGA’s underlying sources could not be positioned.
The argument in opposition to prediction markets
The states have been having a tough time getting individuals on board with their philosophical case in opposition to prediction markets. Court docket rulings in nearly 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 lined the jurisdiction battle 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 common, and every kind of regulators and lawmakers can level straight at schooling funds, pension contributions, and responsible-gaming packages and inform voters that is the place the billion is siphoned from.
The size of the playing market is finest seen in New York, which taxes on-line sports activities betting at a 51% charge, the very best within the nation. Regardless of the insanely excessive tax charge, 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 firms report, even this teeny tiny tax represents a big income stream for the federal government. Because of this we’re unlikely to see any type 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 Playing Act, a bipartisan invoice that might bar any CFTC-registered venue from itemizing a contract resembling a sports activities wager or a on line casino recreation. The strain has been constructing on the company from the states as effectively, with 41 attorneys common 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, but it surely’s simply a part of a for much longer record of issues that embody shopper security, recreation integrity, and who will get to manage playing within the first place. When somebody locations a wager by means of a licensed sportsbook, a complete equipment of state oversight comes hooked up: a grievance course of if a payout goes sideways, responsible-gaming safeguards, and monitoring designed to flag match-fixing or insider exercise. These 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 by means of negotiated compacts that prediction markets step round fully. By now, it is grown heated sufficient that the playing business has begun splitting in opposition to itself, and it is pulled the White Home straight into the center of issues.
The fracture contained in the playing enterprise
That is such a posh downside 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 way in which federally regulated contracts allow them to attain prospects 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 in opposition to a brand new wave of firms that used to sit down at its personal desk.
The political discourse escalated this week as effectively, when President Trump posted on Reality Social that it was “critically vital” for the CFTC to maintain unique authority over prediction markets, a place sophisticated by his son Donald Trump Jr.’s paid advisory function at Kalshi and his funding in Polymarket.
The administration has been litigating arduous to again that view, with the CFTC suing Arizona, Connecticut, Illinois, New York, Wisconsin, and Minnesota. Minnesota not too long ago grew to become the primary state to cross an outright ban on prediction markets beneath 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 wider push, with not less than 15 states having launched laws this 12 months to rein within the platforms.
However beneath all of that political motion and authorized noise lies the explanation why prediction markets matter in any respect: sheer quantity. Month-to-month prediction-market buying and selling climbed from round $1.2 billion in early 2025 to greater than $20 billion by early 2026. It is an unparalleled progress charge, even within the crypto business, and it led to a $2 billion funding from Intercontinental Alternate 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 arduous to recast them as untaxed sportsbooks, a battle many count on will attain the Supreme Court docket.
Whichever method that goes, the following part will play out within the locations the affiliation retains pointing towards, the statehouses, attorney-general workplaces, tribal governments, and congressional committees now watching a fast-growing market develop effectively past their attain.
