LAS VEGAS – Gambling corporate stakeholders and state-level regulators at an industry conference this week reaffirmed their position that prediction market event contracts on sports constitute illegal gambling. The determination in the eyes of the U.S. legal system likely won’t be settled for years to come.
- Gambling industry leaders and regulators at G2E 2025 reaffirmed that sports-related prediction market event contracts constitute illegal gambling.
- Prediction markets like Kalshi and Polymarket face at least 18 active court battles across multiple states, with the issue widely expected to reach the U.S. Supreme Court by 2027 or 2028.
- Despite legal uncertainty, prediction markets continue to grow rapidly – particularly in sports contracts – posing potential disruption to regulated sportsbooks and state gaming revenues.
Twelve months after prediction markets were hardly discussed, industry speakers at this year’s Global Gaming Expo (G2E) used much of the conference to discuss these platforms’ sports event contracts, considered by many of the same stakeholders to be illegal gambling. As consensus from major gaming operators and the officials that regulate them maintain these sites operate illegally, there remained uncertainty about their fate as they undergo legal battles in more than a half-dozen states.
Attorney Kevin King, a partner at Covington & Burling LLP, said during a panel Wednesday a final determination on event contracts’ legality is likely years away. The regulated industry would need patience, King said, as it awaits a seemingly inevitable ruling by the Supreme Court.
“I don't think this is a question of if these issues will reach the Supreme Court,” King said, “I think it's a question of when. And the safe bet here – maybe you should have a prediction market on this – would be the summer of 2027 or 2028.”
Prediction market background
Prediction markets entered the national consciousness leading up to the 2024 U.S. presidential elections following a multimillion-dollar marketing blitz and tens of millions of event contracts on the election’s outcome. Prediction market platforms such as Kalshi as well as stock trading sites including Crypto.com and Robinhood have expanded offerings to include pop culture, current events, and hundreds of other possible event outcomes.
Beginning with this year’s Super Bowl, these platforms have offered a growing number of event contracts on sporting events. Users can place contracts on the outcome of games, which critics decry as a workaround to allow illegal sports bets.
Facing crackdowns in major regulated gaming markets including Nevada and New Jersey, Kalshi preemptively sued in court, arguing they were legal under the federal Commodities Futures Trading Commission (CFTC), which supersedes state regulatory authority. Courts in both states ruled in Kalshi’s favor for preliminary injunction initially, but courts in other states, including Maryland, have ruled against the platforms, setting up what will be a multi-year, nationwide legal battle. Prediction markets are now undergoing at least 18 separate court battles across more than a half-dozen states.
1/ Some thoughts on @ICE_Markets' investment into @Polymarket. Also, a link to my prediction market slides from yesterday's @EilersKrejcik's industry briefing at #g2e2025.
— Chris Grove (@OPReport) October 7, 2025
🧵👇
In the meantime, these platforms – and sports event contracts in particular – have grown in popularity, boosted by the current NFL season. Major prediction markets now see a sizeable majority of their contracts placed on sporting events.
This is expected to grow as they offer more event contracts on sporting outcomes beyond just outcomes and totals and now allow combined contracts that replicate single-game parlays, a key revenue driver for regulated sportsbooks.
Prediction markets have also gained high profile financial backers. Polymarket, which was forced to stop U.S. operations less than a year ago, received a $2 billion investment from the New York Stock Exchange’s parent company ahead of a re-launch expected in the coming weeks.
Long-term prediction market future
Regulators and gaming stakeholders see these operations as a growing proliferation of illegal gambling.
Along with legal challenges, a growing number of states have sent cease-and-desist letters to these sites. Several states with regulated sportsbooks have also warned their licensees that they could jeopardize their licenses if they offer prediction markets in any jurisdiction in the country.
FanDuel and DraftKings, the two largest sportsbooks by U.S. market share, have both addressed prediction markets in corporate earnings calls and this year’s G2E conference. While, publicly downplaying the threat to their financial bottom lines, arguing sportsbooks offer far superior product offerings, they have also considered a future with nationwide, federally regulated prediction markets instead of the existing state-by-state patchwork of regulated sports betting. FanDuel is working with CME Group to offer event contract-style offerings on non-sporting events and DraftKings has considered launching a prediction market of its own.
For any sportsbook, a sports event contract platform – one that would presumably allow them to accept contracts in unregulated sports betting markets including California and Texas – is unlikely until the courts determine their legality. MGM CEO Bill Hornbuckle told the G2E conference this week BetMGM wouldn’t launch a prediction market unless it had complete authorization to do so by the courts.
If the courts rule in prediction markets’ favor, it could upend years of state-led sports betting legalization and regulation efforts, potentially costing state governments hundreds of millions in collective annual revenue and allow more than a hundred million American adults living in states without legal sportsbooks access to an explicitly legal variation of sports gambling.
Such a decision, legal analysts believe, is likely years away.
Both prediction markets and the regulated gambling entities fighting in lower-level courts agree the outcome is destined for a Supreme Court decision. With a growing possibility district and appeals courts will reach disparate conclusions, the Supreme Court is well positioned to make a final determination, King said during Wednesday’s panel.
In the meantime, the entire industry needs perseverance as they await what seems increasingly likely to be the high court’s ruling.
“We’re going to have to be more patient going forward,” King said.
