The Kentucky Derby is like the Super Bowl of horse racing, and people bet like it is, too.
Last year’s Kentucky Derby drew a record $234.4 million in wagering. All-sources handle for Derby Week as a whole rose to a new record as well at $473.9 million.
So why can’t you bet on the Kentucky Derby at Kalshi, or DraftKings Predictions, or FanDuel Predicts? Why aren’t there contracts for trading involving the fourth race at Santa Anita? Could the horse racing industry not benefit from some CFTC-governed hedging and price discovery as well?
- Federally regulated prediction markets like Kalshi offer contracts on major sports but have thus far avoided horse racing, even marquee events.
- Churchill Downs Inc. CEO Bill Carstanjen says the Interstate Horseracing Act gives tracks control over wagering rights and requires their consent, which they have no plans to grant to prediction markets for the foreseeable future.
- With complex legal risks and horse racing generating far less betting volume than other sports, prediction markets may see little incentive to challenge existing laws or disrupt the current pari-mutuel system.
Federally regulated prediction markets have shown little fear in facilitating wagering on the NFL, MLB, NBA, and the NHL, the last of which has actually partnered with the likes of Kalshi and Polymarket.
And yet the exchanges appear to have a healthy fear of, or perhaps respect for, betting on horse racing. They have steered clear thus far, at least in the U.S. regulated market (Polymarket's offshore platform did facilitate some Kentucky Derby wagering).
Federally regulated prediction markets have not yet dared to dabble in horse racing-related event contracts. Still, they are enough of a threat for Churchill Downs to now mention the exchanges as being among the "significant competition" now facing the Kentucky Derby owner. pic.twitter.com/DlaiHubHvx
— Geoff Zochodne (@GeoffZochodne) February 26, 2026
What’s up with that? Prediction markets have cited their federal regulation and federal legislation as what allows them to soar above state-level oversight and offer widespread online sports wagering in the U.S. So are prediction markets really going to disrupt the status quo for legalized sports betting for every sport but the sport of kings?
Some explanation has been offered by the chief executive officer of Churchill Downs Inc., the owner of the prestigious Kentucky Derby.
CEO Bill Carstanjen has suggested that prediction markets aren’t something the company is really all that concerned about right now. Carstanjen has also pointed to the federal law governing wagering on horse racing, the Interstate Horseracing Act (IHA), which he says grants CDI intellectual property and wagering rights for its product.
“In essence, you need the approval of the content producer if you want to take wagering or conduct wagering activity on our races or other pari-mutuel horse races,” Carstanjen said last year. “So I think that's an impediment to that activity happening on that platform. But the platform, in and of itself, it's a subject of a lot of discussion in the country, and certainly we watch it. But it's not a risk or a particular concern for what we do with the Kentucky Derby and pari-mutuel wagering on horse racing.”
Carstanjen reiterated his thinking this week during Louisville-based CDI’s latest earnings call, saying his company operates “under a different legal paradigm than other sports offerings in the United States.”
Not without our say-so
While CDI noted in its most recent annual report that prediction markets are now among its competitors, Carstanjen again pointed to the IHA and the protections it provides.
“So, to take wagers across any forum, whether it be a sports wagering platform, another horse racing platform, such as an (advance deposit wagering platform), or a prediction markets platform, you need our express consent,” Carstanjen said. “You can't just do it without that.”
But could that “express consent” be given someday? Well, maybe, but it isn’t coming anytime soon, Carstanjen suggested.
“We haven't agreed to provide our content to prediction markets,” the CDI CEO said. “We feel like we have plenty of distribution, and we like the terms of our distribution. So that's our focus for delivering access to our content to the customer base out there. And, for the time being, that's how we expect to proceed, and that's what's best for our customers and our constituents, including the horsemen. So, prediction markets are not a part of the parimutuel wagering on horse racing story, nor would I expect it to be anytime in the future.”
Is that that, then?
It’s probably worth noting that while Churchill Downs is an influential player in the horse racing industry, it’s not the only player. Others may feel differently about prediction markets. CDI has also had some success of its own in challenging state gambling regulators.
$12.5M in volume on Kalshi thus far for State of the Union-related mention market bets. The (bettor-informed) forecast is predicting a very high likelihood of Trump saying "250" or "trillion," while "hockey" is currently priced at 90%+ right now as well. pic.twitter.com/Us41l3xiHz
— Geoff Zochodne (@GeoffZochodne) February 25, 2026
Moreover, prediction markets may have no interest at all in the pooled, pari-mutuel style of wagering on horse racing. If they were to facilitate betting on the sport, it would probably be using the “yes/no” format of event contract trading they use for everything else. Would that clash with the IHA?
Interestingly, the IHA says right out of the gate that “the States should have the primary responsibility for determining what forms of gambling may legally take place within their borders.”
That provision alone may be one prediction markets do not wish to get close to, as they are currently arguing that states can’t stop them from offering sports-related event contracts. While prediction markets also argue they’re not a form of gambling, why take the risk?
Still, the IHA suggests there should be some federal intervention in horse racing, for the government to “prevent interference by one State with the gambling policies of another, and ... protect identifiable national interests.”
It adds that “in the limited area of interstate off-track wagering on horseraces, there is a need for Federal action to ensure States will continue to cooperate with one another in the acceptance of legal interstate wagers.”
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Take it up with the lawyers
Yet the other definitions in the IHA make it clear that betting on horse racing shall not be a free-for-all. The definition of “interstate off-track wager” in the law is “a legal wager placed or accepted in one State with respect to the outcome of a horserace taking place in another State and includes pari-mutuel wagers ... accepted by an off-track betting system in the same or another State, as well as the combination of any pari-mutuel wagering pools.”
The definition of “off-track betting system” is “any group which is in the business of accepting wagers on horseraces at locations other than the place where the horserace is run, which business is conducted by the State or licensed or otherwise permitted by State law.”
Would buying a “yes” contract on a horse to win a race be a legal wager? Would someone, some company, or some market maker on the other end of that prediction market trade be “in the business” of taking bets on horse racing?
Furthermore, for an “interstate off-track wager” to be accepted by an “off-track betting system,” the IHA requires “consent” from a few entities, which goes back to what Carstanjen was saying. For example, you’d need the permission of the track operator.
Federally regulated prediction markets have not yet dared to dabble in horse racing-related event contracts. Still, they are enough of a threat for Churchill Downs to now mention the exchanges as being among the "significant competition" now facing the Kentucky Derby owner. pic.twitter.com/DlaiHubHvx
— Geoff Zochodne (@GeoffZochodne) February 26, 2026
So all the above raises a lot of questions. Do prediction markets want to pay the legal cost to find out whether any of that does or doesn’t apply to them? They’re already on the hook for enough billable hours as is due to their court battles with state gambling regulators.
There is another real question about whether the juice would be worth the squeeze. Horse racing is not the huge draw for gamblers it once was. Pari-mutuel wagering on U.S. races fell by 2% last year despite handle for state-regulated sportsbooks and trading volume for prediction markets continuing to grow.
Indeed, the $11 billion in bets on U.S. horse racing paled in comparison to the $167 billion that the American Gaming Association reported was bet on other sports last year. So, is horse racing worth the hassle?
Maybe there’s an argument that horse racing would benefit from allowing prediction markets to facilitate wagering on the sport, albeit under the right conditions and with money guaranteed to the industry. Or maybe it’s just a bridge too far for entities that continue to torment the rest of the U.S. gambling industry.
And maybe there’s a third or fourth explanation (such as friends in Congress) that would complete the trifecta and superfecta, so to speak. For now, though, some in the horse racing business feel relatively safe from the prediction market boogeyman.
