On Election Day 2024, online financial exchange and prediction market Kalshi took out an ad on the oversized electronic advertising board above the entrance to the Miracle Mile Shops at Planet Hollywood, listing live wagering odds on Donald Trump and Kamala Harris.

At the time, the gaming industry’s concerns about Kalshi and other prediction market operators stepping into the sports betting arena were just beginning to percolate.

Nearly a year later, the pot boiled over into a full-scale meltdown just in time for last week’s Global Gaming Expo in Las Vegas. 

Commonly referred to as G2E, the annual gathering typically centers on the newest casino games showcased on the tradeshow floor inside the Venetian Expo. But not in 2025.

Starting with remarks on the main stage’s opening day by American Gaming Association (AGA) CEO Bill Miller to multiple panel discussions, the effect Kalshi and other similar businesses are having on state and tribal-regulated sports betting operations drew the bulk of the G2E audience’s attention. 

Through their online presence, prediction markets — which are regulated federally by a commodity-focused regulatory panel — reach into all 50 states, including those that do not offer legal sports betting, such as California and Texas.

In Tuesday’s keynote address, Miller highlighted state and tribal gaming operations as a system “founded on a regulatory approach that upholds the public interest and looks out for consumers while giving companies the license to operate, innovate and grow.”

“The free riders?” he said, referring to prediction markets. “They thumb their nose at this approach to gaming.”

Nevada is one of nearly two dozen states and tribal gaming authorities that have filed federal lawsuits seeking to block Kalshi and other prediction markets from offering sports wagering contracts (the term companies use to describe the business) in their jurisdictions. 

Multiple cases are winding their way through the federal judicial process, with experts predicting that a legal remedy might not be in place until sometime in 2026.

Jefferies Equity Research analyst David Katz wrote in a Thursday research note that ongoing concern about prediction markets could be the catalyst for state gaming authorities to draft new regulations.

“While legal processes are likely longer-term, operators, states, leagues and tribes are likely to drive regulatory solutions,” Katz wrote.

G2E organizers knew heading into the tradeshow and conference they couldn’t ignore prediction markets, which allow people to wager on the outcomes of events ranging from entertainment, politics, pop culture, financial markets and even the weather in the form of “yes” and “no” contracts. 

Sports as a share of prediction market trading volume has grown exponentially over the past year, and the start of the football season heightened the interest. Kalshi announced last month that the platform had taken in more than $441 million in trades — the term they use to describe wagering — across the opening four days of the NFL season.

Miller's aggressive comments about prediction markets come amid fears that companies such as Kalshi will slice into the $13.7 billion produced by U.S. sportsbooks in 2024, which was nearly one-fifth of last year’s record-breaking $72 billion in total gaming revenue. 

“They decide where and when they’ll operate, telling states, tribes and citizens they have no voice in the process,” Miller said of the prediction market’s emergence. “They pay a pittance in taxes and certainly do not generate the $330 billion in economic impact or any of the community benefits we provide. When it comes to helping customers play responsibly, they couldn’t care less.”

Prediction market companies were not invited to G2E, given that they are not members of the organization, but that didn’t stop Kalshi from making news. On Friday, Kalshi announced raising $300 million in funding that will allow expansion into 140 countries. According to Kalshi CEO Tarek Mansour, the deal values the company at $5 billion.

Sara Slane, a longtime sports betting consultant and former gaming association executive who became Kalshi’s head of corporate development in April, defended the current regulatory structure in an email to The Nevada Independent. 

“The federal government is significantly better equipped to regulate financial markets than 50 separate slot machine regulators, which do not have the capacity, expertise, or legal jurisdiction to regulate futures,” Slane wrote.

“U.S. markets need to encourage innovation and choice in financial services,” she added.

Regulators and Congress react

Gaming regulators and members of Congress have begun to weigh in on the issue, and it’s not favorable to the prediction markets. 

On Wednesday, Nevada Gaming Control Board member George Assad publicly applauded a ruling by U.S. District Judge Andrew Gordon denying a request by Crypto.com to continue operating sports-related events contracts in Nevada while litigation filed by the board makes its way through the courts.

"The gig is up. A derivative contract, whatever you want to call it, is nothing more than a sports wager,” Assad said during the board’s public comment session. "Every bet made in this town is a contract. You can call it a derivative contract. You can call it a credit default swap, like they did during the housing bubble. Whatever you want to call it, it's still a sports bet. It's under the jurisdiction of the Nevada Gaming Control Board.”

Kevin King, a Washington attorney who is a partner with Covington & Burling, said the ruling against Crypto.com could confuse the matter as Gordon earlier this year ruled in Kalshi’s favor on a similar request for a preliminary injunction. Crypto.com made a similar request, but Gordon denied it verbally. The written order with his rationale has not been filed as of Friday.

“The same judge has come to different conclusions,” King said. “One can speculate that that might generate additional action, maybe an additional appeal.”

Per Slane, Kalshi’s attorneys believe the company is “on very strong legal footing in all cases and are confident that these matters will be adjudicated quickly.”

Meanwhile, Capitol Hill has also taken notice. 

Sen. Catherine Cortez Masto (D-NV) and Sen. John Curtis (R-UT) wrote in a Sept. 30 letter to the Commodity Futures Trading Commission (CFTC) that gaming activities are lawfully regulated by state and tribal authorities and that a federal agency should not have a role in the industry.

“The CFTC is expressly prohibited from allowing event contracts that involve gaming,” the senators stated in the letter that was signed by four other senators, including Sen. Jacky Rosen (D-NV). “Despite this prohibition, the CFTC is permitting sportsbook gaming to inappropriately designate themselves as ‘event contracts’ with oversight by the CFTC.”

Cortez Masto and Curtis said the CFTC is undermining “the sovereign authority of states and tribes to regulate gambling within their jurisdictions and risks federalizing an area of law that the Supreme Court has held is reserved to the states.”

On Thursday, Pennsylvania Gaming Control Board Executive Director Kevin O’Toole sent a letter to the state’s 19-person congressional delegation calling sports prediction markets “a significant threat” to Pennsylvania’s gaming regulatory structure.

O’Toole wrote that the federal trade commission needs “to consider the inherent problems caused by a dual-track system of state-regulated legal sports wagering and purported futures trading on sporting events under the facade of federal regulation.”

Slane bristled at remarks that compared Kalshi to illegal offshore sports betting operations.

“The notion that Kalshi is in any way similar to an illegal offshore gaming operation is laughably inaccurate,” she said. “Kalshi is legal, onshore and not a gaming platform."

‘A major disadvantage to us’

During G2E’s keynote session, three gaming executives had varied opinions on prediction markets. 

MGM Resorts International CEO Bill Hornbuckle, whose company operates sports wagering provider BetMGM, said competing with a company “that’s unregulated in the context of gaming and not taxed, is competitively a major disadvantage for us.” 

He said that prediction markets being regulated by a government agency invites the notion that the federal government will “step into our space.” Hornbuckle added, “That is something this industry has historically and categorically said ‘thank you, but no thank you,’ to for decades.”

The CEOs of the nation’s two largest sports betting operators — FanDuel and DraftKings — took a more muted approach on prediction markets. Neither company is licensed in Nevada.

FanDuel owner Flutter Entertainment announced in August it would partner with the Chicago Mercantile Exchange to potentially create an event contracts platform in the U.S. CEO Peter Jackson told the G2E audience that the company is “very well-placed irrespective of which path we end up following.”

Meanwhile, DraftKings applied to join the National Futures Association in August, a move considered an early step toward entering the prediction markets. CEO Jason Robins said companies such as Klashi have flourished because bigger states such as Texas and California have not legalized sports betting.

“I just don't see a world where people are going to prefer [prediction markets] unless you're somebody that's maybe been limited and can't get action,” he said.

Robins declined to answer a question posed by moderator Hope King of Yahoo Finance and Axios, whether prediction markets were another form of gambling or if they should be shut down.

A ‘battle royale’

Florida-based gaming attorney Daniel Wallach, who spoke on several G2E panels covering the prediction markets, believes the legal questions around whether or not prediction markets should be considered gaming operations will ultimately be settled by the U.S. Supreme Court. He said appellate courts will most likely have varying opinions.

Wallach suggested some smaller sports betting companies that had initial conversations with prediction market businesses went nowhere because operators were scared of licensing repercussions. 

“All these new legal fronts, and the legal arguments geographically are expanding because the tribes are now involved,” Wallach said. “This is becoming a battle royale. It’s confusing to everybody because it's such a dynamic, fluid situation, because we also don’t know how many more states are going to be in litigation with Kalshi.”

Wallach isn’t sure the Republican-controlled Congress will actually do anything with the matter, given that the president’s son, Donald Trump Jr., is a strategic advisor to Kalshi.

“Will Congress come in and try to eliminate the activity, provide more clarity or place its thumb on the scale at Donald Trump's direction?” Wallach said. “We don’t know because so much money is now flowing into these markets.”