SAN JUAN, Puerto Rico – Gaming industry lawyers continue to fight the legal battle against prediction market sporting event contracts, which regulators in a growing number of states are challenging as an illegal form of gambling.
- State regulators and gaming attorneys argue prediction market sports contracts constitute unlicensed gambling and fall under state jurisdiction.
- Major platforms like Kalshi, Polymarket, and Crypto.com face mounting legal challenges despite significant investment and rapid expansion.
- Lawyers urge states to proactively challenge prediction markets in court, citing recent rulings that favor regulators.
Multiple states have been challenged by leading prediction markets in court since the platforms began offering event contracts on sports earlier this year. In states with legal sports betting, regulators are looking to halt their operations, said Ohio's First Assistant Attorney General Jonathan Blanton during a panel of attorneys at a gaming conference Friday.
“The idea that there is a quality amongst these contracts that excludes them from regulation as unlawful gambling, or what should be regulated gambling, I think runs contrary to the law,” Blanton said during Friday’s National Council of Legislators from Gaming States conference in San Juan.
“We will fight it out because this is a state regulatory issue for certain portions of prediction markets. Maybe not all of it, but there’s a slice that belongs to the state, and we’re going to fight for it.”
Prediction market background
Major prediction markets including Kalshi, Polymarket, Crypto.com, and Robinhood have accepted hundreds of millions of dollars worth of event contracts on sporting events this year. These contracts allow users to buy and sell shares in the outcome of sporting events in a manner many state gaming regulators say replicates sports betting.
States have deemed this illegal gambling without a license and have sent cease-and-desist notices, challenging the prediction markets in court. The leading prediction markets have countered that they are a form of commodities trading and are subject only to federal regulation, not state laws.
Kalshi challenged Nevada’s move to ban the platforms, winning an early court victory when a judge issued an initial ruling that determined the state could not take enforcement action. However, the same judge reversed the decision last month following a separate challenge involving Crypto.com that ruled in the state’s favor, dealing a blow to Kalshi and prediction markets overall.
This legal uncertainty hasn’t slowed down the prediction markets.
Kalshi and Polymarket are among the major prediction markets that have secured billions of dollars in investments. Fanatics has launched sports event contracts via its prediction market platform this year. FanDuel and DraftKings, the nation’s two largest sportsbooks by market share, are set to follow suit in the coming weeks.
Legal challenges to prediction markets are likely headed to the Supreme Court, former US Attorney Greg Brower said during today's NCLGS conference; Brower wouldn't speculate how or when the cases would be settled but called it the "biggest thing in gaming"
— Ryan Butler (@ButlerBets) December 12, 2025
The massive investments - and the risk to existing gaming licenses - underscore the financial opportunities companies inside and outside of gaming see with prediction markets. With a final legal decision, likely in the Supreme Court, potentially years away, these operators feel the potential of these platforms is too much to sit on the sidelines, despite the legal uncertainty.
In the meantime, gaming attorney Daniel Wallach said during Friday’s conference that states shouldn’t issue cease-and-desist letters, which allow the prediction markets to preemptively sue but instead challenge operators in court. He cited a recent legal ruling in a separate court case in Maryland that went against the prediction market platforms as a blueprint for state regulators going forward.
“(Prediction markets) have the backing of the White House, Wall Street, Silicon Valley, and virtually every white-shoe law firm in the United States. It's the ultimate battle of David versus Goliath,” Wallach told lawmakers and regulators during a panel at Friday’s conference. “They’re Goliath. You're David. But you've got the ultimate slingshot, which is, you've got the law on your side.”
