Digital Wager Wire highlights the most significant events affecting the domestic and international sports betting and gaming industries each week throughout the year.
Prediction Markets: Is a Supreme Court Showdown Inevitable?
Is it a derivative contract or a sports bet? That is the great debate regarding sports event contracts being offered by prediction markets. The prediction markets insist these contracts are the same as a contract on any other commodity, be it gold, silver, or pork bellies.
However, state gaming regulators see it quite differently. They say that if it walks like a duck and talks like a duck, then it must be a duck. Sports event contracts mirror the betting menu featured at any online sportsbook, and that is why the state gaming commissions argue that prediction market operators should be subject to the same licensing fees, taxes, and standards already in place for mobile sportsbooks.
Prediction markets like Kalshi or Crypto.com prefer maintaining the status quo, sans the legal battles against state attorneys general, where they can operate in all 50 states, even those that have not legalized mobile sports betting, and pay no licensing fees or state taxes on the revenues they generate. The reason they can do so is that they are federally licensed by the Commodity Futures Trading Commission (CFTC), and that agency’s authority supersedes the states.
This has led to a blizzard of litigation, with the CFTC now joining its licensees in the courtroom against the states. Rulings at the state, federal, and appellate levels have been for and against both parties, which has led to a legal quagmire, leading many industry insiders to conclude that only a US Supreme Court decision can remedy the issue.
“I think … probably next term would be a very ripe time for that to take this on,” West Virginia Attorney General JB McCuskey said. “With the amount of money that’s going through this, I feel pretty confident that the Supreme Court’s going to weigh in probably sometime in 2027.”
Nevada Signals a Welcome for Licensed Prediction Markets
Gaming states have been beseeching state, federal, and appellate courts to issue injunctions against prediction markets that offer sports-event contracts in their markets. The legal battles continue to rage, but a recent comment by Mike Dreitzer, the Nevada Gaming Control Board chairman, at the National Council of Legislators from Gaming States Summer Meeting, made many sit up and take notice.
When the topic turned to prediction markets that offer sports event contracts, Dreitzer responded, “We’re open to that. We welcome innovation.”
“I think there are elements of the prediction product that are disruptive in the technology sense,” Dreitzer said. “I think people might get caught up in the old sportsbook lingo. … I think the simplicity of the prediction product is very interesting.”
Ironically, Nevada has been vigilant in its efforts to halt prediction markets from operating within its boundaries, but these most recent comments signal the possibility of a truce if the prediction platforms abide by the rules and regulations currently in place for sportsbooks.
“The reason this (Nevada sports betting industry) works is that there’s a bedrock of regulation,” Dreitzer said. “Every time someone takes money out of their pocket and puts it into a machine or makes a sports bet, they’re getting a fair shake.”
He challenged the prediction markets to follow their guardrails, saying, “Show your work. We can show our work. We can show 70 years of history.”
