Arizona Sports Betting Operators Warned To Avoid Prediction Markets

This week, Arizona's Department of Gaming sent a letter to all legal sports betting operators in the state warning them to steer clear of prediction markets. Failing to do so could have consequences.

Key Highlights

+ Warning: The Arizona Department of Gaming warns all legal sports betting operators in the state that partnering with a prediction market operator in or outside the state of Arizona could result in the loss of their license.

+ Following: The letter follows a similar one that was sent by the Ohio Casino Control Commission earlier this summer.

+ Big Market: The Arizona sports betting market has generated billions in handle every year and hundreds of millions in gaming revenues for sportsbooks.

Warning Letter Sent To Sports Betting Operators

In a letter to sports betting operators in the state, the Arizona Department of Gaming (ADG) informed recipients that offering prediction markets either in or outside of Arizona could result in the loss of their gaming license.

...In addition, even if the licensee is not associated directly with the offering or sale of event contracts ot persons in Arizona, its relationship with other persons or entities and conduct in other jurisdictions remains at issue.

[...] if the Department believes that an entity related to a licensee is partnered with a company that is selling event contracts in a jurisdiction outside Arizona in violation of the laws of the jurisdiction, that might (depending on the circumstances) impact a licensing decision.

-Arizona Department of Gaming...

The letter comes after several sportsbooks look to enter the prediction market space by either partnering with a current prediction market operator, like Kalshi, or buying a firm that holds either a Designated Contract Market (DCM) or Futures Commission Merchant (FCM) license from the Commodity Futures Trading Commission (CFTC).

FanDuel recently announced a partnership with CME Group to provide event contracts. However, the companies were clear to state they would not offer sports event contracts.

Arizona is not the first state to send this type of letter. Earlier this summer, the Ohio Casino Control Commission (OCCC) sent a similar letter to its sports betting operators.

Cease-And-Desist Letters Sent To Prediction Market Operators

The Arizona Department of Gaming also says it sent cease-and-desist letters to three prediction market operators: Kalshi, Crypto.com, and Robinhood. There is no indication whether these letters are in addition to the ones sent previously or a second cease-and-desist letter. 

No letter was sent to Polymarket, which is expected to go live in the US any day now. Once the firm is operational in the US, expect the Arizona Department of Gaming to send them a cease-and-desist letter.

With Arizona, seven states have sent cease-and-desist letters to prediction market operators: