Lawmakers in the Land of 10,000 Lakes have tried and failed for years to legalize sports betting. However, next year, the pro-wagering side in Minnesota will have a new argument: prediction markets.
- Federally regulated prediction markets like Kalshi are enabling sports event wagering in all 50 states, including holdouts like Minnesota.
- Some lawmakers could now cite prediction markets as a new argument for legalizing sports betting, aiming to regain control and capture lost revenue from unregulated or federally regulated betting alternatives.
- Industry analysts suggest prediction markets may accelerate legalization efforts nationwide, as states realize they’re missing out on tax revenue and market control.
The possible usefulness of prediction markets in legalizing sports betting was raised last week during the Indian Gaming Association's mid-year conference in Minnesota.
In discussing the prospects for legal and regulated Minnesota sports betting, Democratic-Farmer-Labor Rep. Brad Tabke said he has reasons to not particularly trust the federal government at the moment, and it is federally where prediction markets are regulated in the U.S.
“I want us in the state of Minnesota to have control and the ability to do as much as we possibly can from a state level,” Tabke said during a panel at the IGA conference.
The member of the Minnesota House of Representatives added that “loosey-goosey-ness” and various developments in connection with prediction markets, such as Crypto.com’s partnership with DFS (and now prediction market) provider Underdog, “helps our case for passing a sports betting bill in Minnesota.”
“We need to get a framework in place for making sure that we are able to keep this a well-regulated market and not have so many folks that are stealing money out of the state of Minnesota,” Tabke said.
Embrace debate
So there it is: a prediction market-related argument for legalizing sports betting in Minnesota that didn’t exist a year ago (the first sports event contracts went live near the end of 2024).
Whether that argument convinces more lawmakers to support more legalized gambling in the state remains to be seen, but it could be worth a shot for the pro-sports betting side in the Minnesota legislature.
It could also be worth a shot in other states that have yet to legalize online sports betting sites in the U.S. Although there are only 11 of those states left, there are still some significant markets in that bunch and significant obstacles to legalization, Minnesota included.
"With approximately $1 billion in current monthly volume, Kalshi has processed $6.9 billion in total volume since inception - $6.4 billion of which has come since October 2024"
— Kalshi (@Kalshi) September 15, 2025
Slowly, then all at once. pic.twitter.com/YV7YojsOOa
The effectiveness of the prediction markets argument would rely on how concerned certain lawmakers are about the simple fact that, despite their objections to sports betting, it is happening in their state anyway.
This is already true, as offshore sportsbooks, sweepstakes sportsbooks, and pay-to-play daily fantasy contests could all be considered sports betting. They are also available in states that have yet to authorize sports betting.
For example, DFL Sen. Nick Frentz said at the IGA conference that Minnesota already has “billions of dollars of illegal online sports betting” happening.
Making a federal case out of it
State lawmakers have not necessarily authorized those forms of online gambling, and there is no federal department of offshore sportsbooks, sweepstakes casinos, and DFS purporting to regulate those entities.
Meanwhile, the U.S. Commodity Futures Trading Commission (CFTC), in not stopping the prediction markets it regulates from offering event contracts tied to sports, is essentially allowing a de facto form of sports betting that is available in all 50 states.
While the legality of those sports event contracts is being challenged in court, they are, for now, technically legal and available.
CFTC-regulated prediction markets like Kalshi and Crypto.com are able to “self-certify” their products and users (or “bettors”) can then buy or sell “yes” or “no” contracts tied to certain event outcomes, such as an NFL game. They can do so anywhere in the U.S., including in states that have had an extremely low appetite for legalized gambling, like Utah.
Kalshi just set its record for most trades in a single day.
— Tarek Mansour (@mansourtarek_) September 14, 2025
Election day: 475,057
Today: 484,058
Job's not finished.
At Kalshi, for example, this Thursday's Miami-Buffalo NFL game had generated more than $1.7 million in trading volume as of noon on Wednesday. While Kalshi rose to prominence facilitating wagering on last year’s presidential election, its business has grown with the addition of sports event contracts, and boomed now that the uber-popular NFL season has begun.
Some (or perhaps a lot) of Kalshi’s trading volume could be attributable to states that have not legalized sports betting, such as California, Texas, and, yes, Minnesota. As a result, those states have a technically legal form of sports betting playing out in their backyards, and yet they get nothing.
Therein lies a new argument for pro-sports betting lawmakers in states without legalized sports betting. While the courts or the CFTC could someday put a stop to all of the sports predicting, it could continue for the foreseeable future, and perhaps much longer.
Think again
Some stock analysts see a prediction market argument for new state legalization as well.
“If prediction market activity continues to surge, [online sports betting] regulation likely looks increasingly attractive for state regulators as means to capitalise on the sports betting activity already happening under their jurisdictions,” analysts at investment bank Jefferies wrote in a note to clients on Sept. 3.
The argument is bolstered by the current stance of state-regulated sports betting operators like DraftKings and FanDuel. While they are closely monitoring the situation, and FanDuel has even taken a step toward event contracts via a partnership with CME Group, they aren’t jumping in with both feet just yet.
There are good reasons for this. One is not upsetting state regulators or Native American gaming partners, some of which are fighting prediction markets in the courts over sports event contracts they claim are just sports betting by another name.
“Our state regulators have been very clear,” BetMGM CEO Adam Greenblatt said in July. “Our tribal partners have been very clear.”
Strange times, strange bedfellows
Another reason for not jumping in is that, in a state with both regulated online sports betting and prediction markets, customers may prefer the former to the latter. DraftKings CEO Jason Robins recently said as much.
On Wednesday, analysts at investment bank Citizens also reported on an investor meeting with DraftKings leadership.
“The company has maintained there has been no impact from the existing prediction market operators in states with a legal framework and shared a similar conclusion as us that pricing is worse pre-game compared to the DraftKings sportsbook offering,” the Citizens note said.
Even so, the ultimate value of prediction markets to a sportsbook operator could be in accessing states you can’t enter with your online sports betting product.
For some state lawmakers, it may be better to just legalize online sports betting rather than let prediction markets scoop up that business.
“Prediction markets, backed on a federal level, will allow sports betting companies to legally enter these states to offer sports outcomes and build databases, a potential catalyst for accelerating talks between tribes, states, and gaming companies to create a more traditional framework where all parties benefit from the gaming expansion,” analysts at Citizens wrote on Aug. 20.
