FORT LAUDERDALE, Fla. – Prediction markets are in the midst of what could be a multi-year legal and regulatory battle. The scope of their event contract poses an even greater potential change to the gaming industry.
Key Takeaways
- Legal and Regulatory Uncertainty: Prediction markets like Kalshi and Polymarket face legal challenges from state regulators over offering sports-related event contracts, but federal courts have ruled they fall under federal jurisdiction, not state gaming laws – decisions now under appeal.
- Minimal Current Impact on Sportsbooks: Industry stakeholders agree that, in their current form – offering only single-game contracts with limited betting types – prediction markets pose little economic threat to regulated sportsbooks, even in states without legal sports betting.
- Potential Disruption Through Parlays: The real threat lies in the future possibility of prediction markets offering parlays, which are highly profitable for sportsbooks. If federally regulated markets begin offering these widely, they could dramatically disrupt the U.S. gaming industry.
Gaming stakeholders at a panel during an industry conference Thursday questioned the legal justifications for prediction markets’ sports-focused event contracts under their current regulatory structure. The panelists at Thursday’s SBC Summit Americas agreed that should prediction markets such as Kalshi and Polymarket, with their current offerings, be permitted to operate, they present a negligible challenge to regulated sportsbooks.
The larger question remains what happens if – or when – these platforms could offer parlays.
Prediction markets overview
Prediction markets have entered the national consciousness following extensive advertising campaigns around the 2024 U.S. presidential election. Customers could place event contracts on the election’s outcome, winning money back if their candidate won.
Major prediction markets, which now include financial platforms such as Robinhood and Crypto.com, have offered similar event contracts on sporting events, most prominently around this year’s Super Bowl. Some platforms now offer these on individual sporting events such as NBA and NHL playoff games.
This had led at least a dozen states to consider legal action against these platforms, arguing they act as illegal sportsbooks. Kalshi responded to cease-and-desist letters from Nevada and New Jersey, two of the nation’s most prominent gaming states, by legal challenges of their own.
Federal courts in both states ruled that state regulators had no authority over Kalshi. As a prediction market, these platforms are regulated by the federal Commodity Futures Trading Commission (CFTC), not the states.
The ruling is being appealed. Kalshi and other prediction markets continue to offer event contracts on sports, politics, and thousands of other offerings in all 50 states.
Gaming attorney Daniel Wallach railed against the legality of prediction markets during Thursday’s panel, arguing that Kalshi’s own legal arguments in the court cases that permitted them to offer political event contracts contradict their justification for offering sports contracts.
"There is no congressional authorization for sports related event contracts, at least not from my perspective," Wallach said.
He also noted the conflict of interest for CFTC chair nominee Brian Quintenz, a Kalshi board member. Donald Trump Jr., the president’s son, is also an advisor to Kalshi.
"Does any of this matter?" long-time gaming industry figure Melissa Blau says about legal arguments against Kalshi, noting that the president's son is on the company board
— Ryan Butler (@ButlerBets) May 15, 2025
This seeming conflict of interest could, gaming industry figures have noted, could help Kalshi moving forward. Though attorneys such as Wallach have argued that prediction markets have no legal standing to offer sports event contracts, politics could allow them to continue.
Larger question on prediction markets
The bigger question comes with what shape prediction markets will take if they are permitted to continue operations.
The current prediction market offerings only allow one-game contracts and typically only for major sports. No major platform accepts contracts on individual player props, for example, or many of the thousands of other bet types available at regulated sportsbooks.
Should prediction markets continue in their current shape, stakeholders at Thursday’s conference predicted a negligible impact on sportsbooks’ bottom lines.
Major publicly traded sportsbooks have noted no economic impact from prediction markets. Though these platforms could be available in California, Texas or other jurisdictions with no legal sportsbooks, the limited offerings cap their revenue potential and subsequently the market share they could take from the regulated books.
Multi-leg parlay bets make up the majority of sportsbooks’ profits. U.S. market share leaders such as FanDuel and DraftKings have increased their profit margins significantly as they have offered a growing number of these parlay and single-game parlay bets.
Should a prediction market – one regulated at the federal level and not by the patchwork of states – offer a full wave of parlays, it could upend the entire existing U.S. betting model.
Panelists noted Thursday that a prediction market would have to undergo a lengthy licensing process from the CFTC before it could offer event contracts. But a major operator could buy an existing prediction market and, with minimal friction, potentially offer a parlay product in 50 states, branded as a prediction market.
That potential is still likely years away as prediction market’s legality makes its way through the lengthy court process. Congress could also potentially take action. And a future administration could prove far less favorable politically to prediction markets.
But as uncertainty swirls around the long-term legality of prediction markets, it’s becoming more clear the greater threat is not their existence, but what types of event contracts they could potentially offer.
