Digital Wager Wire highlights the most significant events affecting the domestic and international sports betting and gaming industries each week throughout the year.
CFTC Expected to Remain Neutral on Prediction Markets
State gaming regulators nationwide have been targeting prediction markets such as Kalshi, Polymarket, and Crypto.com. These are the regulatory agencies charged with setting the rules for mobile sports betting and iGaming in those jurisdictions that allow it, as well as licensing those platforms that meet their criteria and pay the fees.
Prediction markets offering contracts for trading on sports events operate much like sportsbooks, except they don’t pay the states their licensing fees or taxes on revenue. Moreover, they contend they do not even have to abide by their rules because they are governed by a higher power, the Commodity Futures Trading Commission (CFTC).
Federal Authority Versus State Gaming Laws
The CFTC is a federal agency whose authority overrides the state’s rules and regulations. At least that’s what the CFTC has successfully argued in court, but case law on this topic is far from settled, with more legal battles on the horizon.
However, these prediction markets, which traditionally deal in gold, silver, and commodities contracts, continue to operate unrestricted in all 50 states. This has infuriated the states that have passed sports betting legislation and initiated these lucrative industries.
The issue is that the prediction markets are cannibalizing the mobile sportsbook’s business, which means less revenue for them and fewer taxes paid to the states.
The CFTC has declined to rein in their licensees and has taken a laissez-faire approach to the legal fireworks that have ensued. And it doesn’t appear much will change with the induction of the new CFTC chairman, Michael Selig.
Selig Signals Policy Continuity
During his confirmation hearing, Selig was questioned about his views on prediction markets’ involvement in sports event contracts. While he used judicious language, he made it clear that not much would change under his leadership, with the likely outcome being a US Supreme Court showdown to definitively resolve the issue.
“As someone who spent many years practicing law at law firms as well as studying the law in law school, these are complex issues as to the interpretation of what it means to constitute gaming,” Selig said. “And, of course, I have the utmost respect for our judges working on these issues in our court system, and I intend to always adhere to the law and follow what judicial decisions tell me to follow.”
Windy City Lawsuit
The Sports Betting Alliance, comprised of industry powerhouses DraftKings, FanDuel, BetMGM, and Fanatics, has filed a Cook County lawsuit against the city of Chicago, claiming the new taxes on sports betting revenues are “invalid and unconstitutional” under Illinois law.
“The State—not the City—has sole authority to license and tax online sports wagering in the State of Illinois,” the SBA states in the complaint. “The Illinois Constitution reserves authority over licensing for revenue and income-based taxation to the State unless expressly delegated. The Illinois General Assembly has never authorized the City to impose licensing fees or income-based taxes on online sports wagering.”
The taxes and licensing fees entered into the 2026 Chicago budget, which began on January 1st, include a 10.25% tax on revenue generated from those wagers within the city limits. Moreover, the Chicago City Council also voted to impose a licensing fee.
Digital Wager Wire will continue to monitor this story as events unfold.
