NEW YORK - Prediction markets’ potential to upend the existing state-by-state gaming regulatory structure could be an impetus for jurisdictions to take more autonomy over their taxes and regulations, some gaming stakeholders believe. Others maintain that prediction markets’ growth could stall further progress.
- Industry stakeholders say prediction markets could push states to legalize sports betting and iGaming to reclaim regulatory control and tax revenue.
- Others argue the markets may slow legalization as some lawmakers wait for federal clarification on their legality.
- Most experts believe the Supreme Court will ultimately decide prediction markets’ legal status, while new companies continue entering the space.
Separate opinions expressed at a gaming industry conference this week underscore the continued attention - and uncertainty - around prediction markets’ future. While panelists at Tuesday’s NEXT.io Summit agreed that the fate of prediction markets will be settled years from now by the courts, their impact on existing gaming remains both significant and unclear.
Catalyst for expansion
Since large-scale prediction markets began offering sports event contracts in the U.S. more than a year ago, many sportsbook legalization advocates have argued this will spur state-level legalization.
Prediction market contracts allow users to trade on sporting events in a manner that resembles sports betting. Market leaders such as Kalshi and Polymarket now allow users to display contract prices like American betting odds, further blurring the differences for many users.
Unlike regulated sportsbooks, states see no direct tax revenue from federally regulated prediction markets, which generate most of their revenue from fees charged on each trade. Sports Betting Alliance president Jeremy Kudon said during a panel Tuesday this could compel more states to act.
Sports Betting Alliance President Jeremy Kudon reaffirmed position that prediction markets could lead to more state-level sports betting and iGaming legalization, especially if PMs pursue event contracts on digital casino games
— Ryan Butler (@ButlerBets) March 10, 2026
Kudon, whose group lobbies on behalf of FanDuel, DraftKings, Fanatics, and other leading online gaming companies, said the emergence of prediction markets is already influencing state-level gaming debates as lawmakers become increasingly aware that wagering activity could shift outside their regulatory frameworks. He pointed to recent legislative discussions in Georgia as evidence that prediction market platforms have heightened urgency around legalizing sports betting and iGaming.
Unlike the multibillion-dollar offshore market that has largely existed outside the public eye, prediction markets are advertising heavily, including marquee events such as the Super Bowl. This growing prominence has finally caught the attention of lawmakers, Kudon said.
“What I think is amazing is we've talked about the illegal market for eight years until we're blue in the face educating (lawmakers), and we've never seen members actually really understand the risk like they do right now, with something that's federally regulated in the prediction markets.”
Obstacles remain
Other speakers at Tuesday’s event were not as bullish.
Prediction markets have swayed some lawmakers against taking action as they await federal clarification, said John Pappas of Corridor Consulting, a group that works with elected officials to legalize iGaming and sports betting. He cited opposition from a stalled mobile sports betting legalization bill in Mississippi, where some lawmakers said the existence of federal preemption could mitigate the need for state-level sports betting.
Logistics have also played a role, panelists said. Thirty-nine states have started a form of legal sports betting since the Supreme Court struck down the federal wagering ban in 2018; those that haven’t possess political or legal structures that make a change difficult.
Prediction markets' impact on existing sportsbook revenues, and their accompanying taxes, is also unclear.
The major sportsbooks have said during recent earnings calls that they've seen negligible impact on their bottom lines. They are also prepared to invest hundreds of millions of dollars on their own sports event contract platforms.
Meanwhile, the more established prediction markets are facing lawsuits in more than a dozen states as jurisdictions challenge the operators’ claim that they are a federally regulated exchange and not subject to state laws. Gaming industry stakeholders largely agree a final resolution on the legality of sports event contracts will likely be settled by the Supreme Court, a sentiment Kudon and other speakers reiterated Tuesday.
Though the legal question remains unresolved, prediction markets will continue to grow until the Supreme Court's ruling years from now. Multiple speakers Tuesday said this delay will allow more companies to enter the space, accelerating the momentum for prediction markets and making them hard to ban.
FanDuel, DraftKings, and Fanatics have already launched prediction markets in the meantime. DraftKings will soon unify its prediction market app into its existing sportsbook app, allowing users in all 50 states to place bets or trade sports event contracts.
Major leading tech and finance companies including Robinhood, Coinbase, and the parent company of the New York Stock Exchange have also partnered with prediction market operators or launched their own. It's part of a larger corporate shift that gaming stakeholders believe could lead to an increased integration of financial companies and a new wave of trading platforms that replicate - and possibly supersede - sportsbooks.
Prediction markets’ impact on regulated gaming remains difficult to project as questions persist about adaptation and potential court action. But their economic gravity has become the defining issue for gaming industry changes inside and outside statehouses, likely for years to come.
