NEW YORK - It might be time to just sit back and admit that we have no idea what’s happening these days.
- Legal experts suggest no one can confidently predict how courts will ultimately rule on prediction markets, leaving the industry’s future uncertain.
- Younger users and strong demand for speculation may help prediction markets grow, especially where traditional sports betting is restricted.
- Competition from major sportsbooks, regulatory changes, or court rulings could either reshape the market or shut parts of it down, but interest in speculative betting is likely to persist.
Rob Schwartz is a partner in the futures and derivatives practice at law firm Morgan, Lewis & Bockius. Before that, Schwartz used to be the general counsel (or chief lawyer) for the U.S. Commodity Futures Trading Commission, the federal regulator of those pesky and ever-disruptive prediction markets.
Schwartz was someone who squared off with Kalshi in court over the CFTC's ability to scrutinize betting on U.S. election odds using prediction markets. So, when it comes to the topic of federally regulated exchanges, Schwartz seems like someone who would be able to give you one of the more educated opinions on what will happen with the seemingly never-ending stream of legal battles over sports event contracts (or "sports betting," if you prefer).
But when asked to give some closing thoughts on Monday at NEXT.io’s “Emerging Verticals” event in New York City, Schwartz didn’t profess to have a crystal ball about the legal fate of prediction markets. In fact, Schwartz said anyone who claims to know what’s going to happen is “pretty much full of shit.”
“They have no idea,” Schwartz added.
Schwartz and the two other lawyers on the panel said a lot of other very insightful and interesting things (apologies for not quoting more of it), but I thought his take encapsulated our current prediction market predicament. One of the more educated people on the subject of prediction markets said nobody knows what’s ultimately going to happen to them in court.
Quick summary of prediction market-related comments from @nextdotio event in NYC:
— Geoff Zochodne (@GeoffZochodne) March 9, 2026
-Nobody knows what's gonna happen in court
-PM volume growing (still mostly sports), online sportsbook handle growth waning
-Other concerns: payments, latency/data, public opinion of sports betting
And that’s just when it comes to the increasingly complicated conversation about the legality of what prediction markets are doing.
Yes, we are currently witnessing a courtroom war over whether sports event contracts are just sports betting by another name, and whether they are subject to state-level regulation and taxation. But that legal uncertainty is just in addition to the uncertainty about what prediction markets will do to the average sports bettor and the broader gambling business. If you wanted, you could extend that uncertain feeling to society more broadly.
TL;DR: IDK
I increasingly felt these vibes during my time in New York this past week. I don’t think anyone has a clue of where prediction markets are going, where they’ll end up, or who will be standing a year, two years, or 10 years from now.
If you claim to know, I would refer you to Schwartz’s comments. Because do you? Do you really?
Consider this: Someone who is 18 in California can’t legally bet on sports right now using an online sportsbook. They could bet on sports using prediction markets. And, for that person, prediction markets may be the only form of sports betting they know.
Customer loyalty is being built, and it could be maintained to the extent that a launch of state or tribe-controlled sports betting is never able to pry that user away from prediction markets. Maybe all they’ll ever want to do is trade.
“Once you give the consumer a product, it's very hard to take it away from them,” California Nations Indian Gaming Association Chairman James Siva acknowledged this week at the NEXT conference in New York.
The tribes in California know this and are fighting hard to stop what’s happening with prediction markets, which is de facto online sports wagering in all 50 states, even if gambling hasn't been legalized there at all. State gambling regulators are similarly trying to push back.
Still, there is the potential for a newer generation of sports bettors that is really just a generation of prediction market users, at least in some places. And it could be that we are just in a new age of gambling on everything, or “speculating,” if you prefer, that dovetails nicely with what prediction markets are doing. That younger generation is growing up in this casino climate. They may really like it.
"I think that speculation in general has just become a much more broad-reaching aspect of all of digital commerce,” said Meredith McPherron, CEO and managing partner at Drive by DraftKings, a venture capital firm, during another NEXT conference panel. “It's just not betting, it's just not the equity markets, it's really a default behavior of this younger generation. And we're seeing it everywhere."
There may still be business opportunities even if betting on elections and sports via prediction markets is killed, McPherron said. She pointed to betting markets for weather, culture, entertainment, and even the price of bitcoin.
“We’re just in the early innings,” McPherron said.
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Liquid courage
Prediction market operators have tried to show they are about more than betting on sports, but the bulk of their transaction volume still comes from people speculating on sports. That is true even after the NFL season ended, with analysts from the Bank of America (BofA) showing at NEXT that about three-quarters of trading remains tied to sports.
The BofA presentation at NEXT also raised some interesting questions about who the “winners” will be in prediction markets. Kalshi has a huge lead right now in the regulated market, and that may give it an edge that’s hard to overcome for newer entrants.
“Often exchanges, because of the liquidity piece, very much gravitate to ‘winner-take-most,’” said Shaun Kelley, managing director and senior research analyst of BofA.
"The end of the world only happens once" - Joe Asher
— Ryan Butler (@ButlerBets) March 11, 2026
The winners of online sports betting in the U.S. right now are indisputable. DraftKings and FanDuel are an entrenched duopoly that has seen off challenges from numerous other brands. Some of those brands are dead and gone now.
DraftKings and FanDuel have also launched prediction platforms and want to be winners in that business. Furthermore, the two giants have indicated an interest in launching market-making arms as well. While prediction markets are framed as “peer-to-peer” trading, where one person is on one side of a trade and someone else is on the other, there are also market-makers there to fill orders.
This goes to the “liquidity piece” Kelley mentioned. Roughly translated, this means money. Prediction markets need money standing by to fill the orders of their traders. It may be a “market maker,” for instance, who will put themselves on the hook for the other 80 cents when you buy a “yes” contract on an NFL team for 20 cents.
All of this raises some intriguing questions. Yes, Kalshi is winning. But along have come two sports betting giants who know how to woo customers. They have done so effectively with “generosity,” such as free bets and profit boosts. If they now have prediction markets and their own market-making arms, could these market makers now help DraftKings and FanDuel to offer an online sportsbook-like level of generosity?
The earliest we could see a Supreme Court case on prediction markets is late 2027, gaming industry lobbyist Bill Pascrell III said during today's NEXT Summit NYC
— Ryan Butler (@ButlerBets) March 11, 2026
Bear with me, but could a DraftKings-affiliated market maker see a customer trying to put together an eight-leg single-game parlay and offer a 30% boost on the payout, baking that generosity into the price offered to the trader? Sure, you’d probably take a hit financially (even though that parlay's probably losing), but it might be worth it to acquire and keep the customer with you. I am not a market maker, and I don’t know how all the mechanics work, but I’m just throwing it out there on the off-chance I’m proven correct. This fight isn't finished.
As Kelley noted, there was a lot of thought in the early days of online sports betting legalization that the winners would be casino companies that had offered such products in Vegas for decades. It didn’t happen, with DraftKings and FanDuel instead using their DFS customers and funded wallets to become the Big Two by a big stretch.
So we don’t really know for certain who will emerge as the king of the prediction markets. We don’t know how big that kingdom could even be. It could still come crashing down.
Swoop there it is (or was)
Yes, the collapse of sports prediction markets could come through the courts. Maybe the U.S. Supreme Court will eventually say all this must end.
It's also conceivable the prediction market apocalypse could come via the ballot box. A presidential election in 2028 could usher in a new, Democratic administration that appoints new members of the Commodity Futures Trading Commission who have a different view and want different rules for the exchanges.
“I don’t think it would be very difficult for the regulator to issue a rule making the case that the costs of this outweigh any potential benefit,” Schwartz said.
And then, all bets are off again. It could all go away “in one fell swoop,” the former CFTC lawyer said.
Then what happens? Probably more lawsuits and money spent. But the demand that has contributed to the success of prediction markets, such as it is, is still alive and looking to be met. And some of it may have never known anything but prediction markets.
That demand will find a home somewhere. It could flow back to state-regulated online sportsbooks, and those sportsbooks could try to cobble together something more prediction market-like at the state level. It could also go somewhere else entirely.
Green means go
And the demand could just stay parked where it is, with prediction markets. They continue to facilitate wagering all over the U.S. If there is some certainty here, it is that prediction markets will be with us for at least a little while longer.
Look at how some state-regulated gambling operators are acting right now, noted Josh Kirschner, partner at law firm Nelson Mullins, during the same NEXT panel as Schwartz.
“What they’re telling us is, by and large, they don’t foresee any immediate consequence,” Kirschner said.
It's when you start thinking past "immediate" that your head starts to spin. And mine has been spun plenty of late.
