Will gaming industry kill or embrace prediction markets they say mimic sports betting?
A Global Gaming Expo keynote session with Kalshi CEO Tarek Mansour would pack two Venetian Expo ballrooms. It won’t happen because gaming leaders would balk at a sports betting disruptor getting a prime speaking role. Still, prediction markets will be much-discussed at next month’s conference.
The gaming industry’s leading trade organization wanted to know if customers understood the difference between traditional, state-regulated sports betting and the newer model of financial trading on a broad range of topics, including sports.
The American Gaming Association (AGA) got its answer.
“Americans know a sports bet when they see one,” AGA CEO Bill Miller said in a statement, after the Washington, D.C.-based group released results of a 2,000-person nationwide survey on the topic last week.
Roughly 85 percent of Americans polled view sports event prediction markets as gambling. The same percentage believes sports betting should only be available through state-licensed sportsbooks and online platforms.
“They expect prediction markets offering sports event contracts to be held to the same rules and consumer safeguards as every other state-regulated sportsbook,” Miller said.
The online survey of 2,025 registered voters was conducted by YouGov on behalf of AGA from Aug. 1-8, and has a margin of error of 2 percent.
An AGA spokesman said the survey sends a clear message to state and federal elected officials: Sports prediction markets constitute gambling and should be regulated as such.
Prediction markets are governed federally by the Commodity Futures Trading Commission and allow adults in all 50 states to make financial trades on a broad range of topics, including sports.
The AGA and gaming regulators in eight states, including Nevada, are concerned that prediction markets are boosting their bottom lines by mimicking sports betting. Customers can purchase contracts with the exchanges based on which team they believe will win a professional or college sports event without a point spread, or on other outcomes such as the timing of a rate cut by the Federal Reserve or whether rapper Bad Bunny will be the top artist on music streaming platform Spotify.
Tarek Mansour, the CEO of Kalshi, a New York-based online financial exchange and prediction market that has been at the forefront of challenges to state-regulated sports betting, said the platform took in more than $441 million in trading over four days that began Sept. 4, which coincided with the first weekend of the NFL regular season.
In social media posts, Mansour wrote that NFL games were “probably nothing” when analyzing the company’s results. He said Kalshi’s trading volume was similar during the 2024 presidential election.
Analysts noted that prediction markets aren’t taking away a significant portion of sports bets.
Jeffries gaming analyst David Katz wrote in a Sept. 3 report that prediction markets are seeing 7 percent of what is legally wagered in sportsbooks.
Through July, the Gaming Control Board said Nevada sportsbooks accepted almost $4.4 billion in wagers, up more than 3 percent from a year ago. Sports betting revenue was $305 million, up more than 15 percent.
“Currently, we do not view betting exchanges as a competitive threat to profitability for existing [sportsbook] operators,” Citizens Bank gaming analyst Jordan Bender wrote in a research note Monday.
Gaming regulators in Nevada and seven other states want to punt the prediction companies out of their jurisdictions, sending off strongly worded cease and desist letters. That has led to Kalshi filing lawsuits, which are pending in Nevada and New Jersey. Nevada has also filed lawsuits against two other prediction markets — Crypto.com and Robinhood Derivatives.
However, cracks in the gaming industry are showing.
Prediction markets have caught the interest of DraftKings and FanDuel, the nation’s two largest sports betting providers. Neither company is licensed in Nevada.
In August, DraftKings applied to join the National Futures Association, which is considered an early step toward entering the prediction markets. That same month, FanDuel, through its parent corporation, Flutter Entertainment, announced it would partner with the Chicago Mercantile Exchange to potentially create an event contracts platform in the U.S.
“The most important question is where is the space going to evolve?” DraftKings CEO Jason Robins asked at the Bank of America Gaming & Lodging Conference in August. “Right now, a lot of cards are being turned over in real time, and we’re getting a lot of information at the federal level that this is here to stay. The question is, what happens with states?”
Gaming attorney Daniel Wallach said during an investors conference call with Katz this week that any uncertainty in the legal process favors Kalshi, which continues to expand its reach. Wallach does not foresee a legal resolution in the next 12 months.
The latest dustup between the gaming industry comes ahead of October’s Global Gaming Expo (G2E), where Robins and Flutter CEO Peter Jackson are expected to address prediction markets.
Mansour, who has been the central figure in the prediction markets’ growth, wasn’t invited or asked to speak in one of the keynote addresses — a position reserved for gaming CEOs or other gaming organizations.
The conference and tradeshow, which runs Oct. 6-9 at The Venetian Expo, has two breakout sessions addressing prediction markets: a discussion on how states address illegal and unregulated gaming, and a second covering how event contracts challenge “the paradigm for regulated gaming.”
Sara Slane, a former AGA senior vice president and a longtime sports betting consultant who became Kalshi’s head of corporate development in April, said she will attend G2E.
In several posts on LinkedIn in the past 10 days, Slane addressed concerns surrounding Kashi. She said prediction markets can’t function under differing state gaming regulations. She suggested the consequences of state overreach “could be devastating” on federally regulated exchanges.
“States have an important role in overseeing sports betting and brick-and-mortar casinos,” Slane wrote. “But when it comes to exchanges, there is also a clear federal role: protecting consumers and ensuring access to fair, transparent, and well-regulated marketplaces on a national scale.”
Cortez Masto reintroduces bill to eliminate sports betting excise tax
Legislation eliminating a decades-old small federal excise tax on sports betting, proposed by Sen. Catherine Cortez Masto (D-NV) a year ago, never saw a hearing.
She now believes the time is right to reintroduce her legislation to slash a 0.25 percent levy on sports bets, referred to as the handle tax.
This comes in the wake of gaming getting a larger share of attention from Congress after a controversial provision was added to July’s reconciliation bill, reducing tax deductions on gambling losses from 100 percent to 90 percent. In July, the Republican chairman of the House Ways and Means Committee committed to raising the tax deduction back to 100 percent during a field hearing in Las Vegas.
Cortez Masto is partnering again with Sen. Cindy Hyde-Smith (R-MS) on the legislation, which would eliminate the excise tax on every legal sports bet that was first enacted in the 1950s. The legislation would also eliminate a $50 “head” tax on every sportsbook employee.
In the House, Rep. Dina Titus (D-NV) has long advocated for the change and introduced similar legislation alongside Rep. Guy Reschenthaler (R-PA).
In a statement, Cortez Masto said, “It’s past time to exempt legal sports betting from outdated taxes that are actually incentivizing illegal sportsbooks.”
According to the Center for Gaming Research at UNLV, the state’s sportsbooks took in almost $7.9 billion in wagers in 2024, which translated into gaming revenue of $482.1 million.
The excise tax was put in place when Nevada was the only state with legal sports betting. Since the U.S. Supreme Court allowed states to legalize sports betting in 2018, 39 states and Washington, D.C., have approved sportsbooks and/or mobile sports betting.
The Washington, D.C.-based American Gaming Association supported Cortez Masto’s efforts a year ago and is backing the latest push.
— Mini Racker, The Nevada Independent
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