Regulators, casinos unite against new gambling gray zone

Industry leaders warn of threats from prediction markets

American Gaming Association CEO Bill Miller spoke like a general preparing his army for battle last week at the Global Gaming Expo in Las Vegas, warning of the danger that increasingly popular services skirting gaming laws pose for the industry and its patrons.

Miller’s hostility largely focused on prediction markets, where people can buy a contract that settles like a wager, depending on the event’s result. Similar to the stock market, the value of each contract rises and falls based on buying and selling patterns.

If someone buys “yes” on whether it will rain on a certain day at 60 cents, they make a 40-cent profit per contract owned if they’re correct. Prediction markets, which have users trade with one another, also purport to measure public opinion through their contracts’ current prices.

Most threatening to those in attendance at this year’s expo has been prediction markets’ move into sports. When the Raiders play the Titans today, Americans can — regardless of their state’s laws — put money on which team will win as well as the total score and margin of victory in the prediction market.

And that competes directly with legalized sports wagering.

“The AGA and our members are mobilizing across every battlefield,” Miller said. “They’re threatening the communities we serve, the customers and consumers we protect and the standards we uphold.”

The topic of prediction markets crept into panels at this year’s G2E as the industry stares down ongoing legal battles to regulate the growing sector. While the AGA heavily opposes predictive markets, there was lingering interest throughout the conference in how the product and its popularity could legally come under gaming’s wing.

Miller said “illegal operators” want to “blur the lines” by calling games of chance by another name, whether those be sporting event contracts, skill games or sweepstakes. All, in his view, are just gambling.

“Why all this deception? It’s simple,” he said. “They want the opportunity, but they don’t want any of the regulatory compliance. And they really don’t care about their concern for the public good, but these illegal actors aren’t fooling anyone.”

Tarek Mansour, the CEO of the prediction market Kalshi, swatted away that type of criticism in an April interview with Axios: “If we are gambling, then I think you’re basically calling the entire financial market gambling.”

Kalshi is also helped by not being the one setting the odds.

A poll commissioned by the AGA released last month found that 85% of respondents believe sports event contracts are gambling. The poll found similarly strong support for regulating prediction markets for sports like traditional sports betting — under state and tribal authority.

That doesn’t seem to be stopping their growth. On Kalshi, which restarted its markets on elections in October after a court ruling, users traded half a billion dollars on the outcome of the 2024 presidential election.

Outcomes of the New York City mayoral election, Super Bowl and 2028 Democratic primary are some of Kalshi’s largest open markets. Kalshi only started sports event trading in January, and it’s now one of its most popular categories.

MGM Resorts International CEO and President Bill Hornbuckle said legal casinos were put at a “major disadvantage” to have a product in the marketplace that’s unregulated “in the context of gaming.” Additionally, prediction markets are much more favorably taxed, Hornbuckle said during his G2E keynote.

Dustin Gouker, a consultant and writer on gambling news, maintains that Kalshi is still small compared with the regulated market. The AGA found that people bet around $150 billion through legal American sportsbooks last year, ESPN reported in February.

But Gouker, whom one G2E attendee called the Paul Revere of prediction markets, said they could potentially erode into the industry’s market share. Event contracts are more popular in unregulated states like California and Texas, he noted, but Nevada’s online sports betting may also be at risk.

Prediction markets have a much lower barrier to entry, with users able to make their deposits online. In Nevada, a bettor’s first deposit for online legal online wagers has to be placed in person, he said. Wagering through large online sports-betting outlets, like FanDuel and DraftKings, which are without bricks-and-mortar sports books in Nevada, is illegal here.

“It might just be an easier experience,” Gouker said of prediction markets. “You have to go through (customer protocols). It’s not nothing, but you don’t have to go to a sportsbook. It’s a difference that I think could definitely impact Nevada as time goes on.”

The Nevada Gaming Control Board, which sees event-based contracts on sports and elections as a form of gaming, has tried to stamp them out here. In March, the board issued a cease-and-desist to Kalshi, writing that the contracts were unlawful “unless and until approved as licensed gaming by the” board.

Kalshi then filed a federal lawsuit and has since been granted a preliminary injunction to continue operations here as the case continues.

Board Chairman Mike Dreitzer didn’t take the same militant tone as Miller. On one G2E panel, he tried to make clear that Nevada gaming regulators wanted to encourage innovation, but that it had to be done in accordance with the law.

“We want the new styles of things that attract patrons to have a safe and meaningful and interesting and entertaining gambling experience,” Dreitzer said. “But again, there’s always that balance.”

Hornbuckle struck a similar note. Regulators in multiple states are telling gaming companies not to venture into prediction markets, but MGM would “absolutely” get in on the action “if it were to break through.”

Currently, there’s just uncertainty.

Arguments against prediction markets at the expo weren’t limited to gaming companies’ bottom lines. Jackie Johnson, director of the Arizona Department of Gaming, said prediction markets ignored all of the safeguards that come with regulated gambling.

She listed a handful of examples: anti-money laundering policies, consumer protection, auditing, technical standards and dispute resolution, among others.

A market from earlier this year on whether Ukrainian President Volodymyr Zelenskyy would wear a suit before July was disputed twice before eventually resolving to “no” on Polymarket. Some commenters complained the decision was wrong.

“As the regulator, we’re looking at consumer protection, protecting the integrity of our current market,” Johnson said. “We can’t just sit on the sidelines.”

Miller said people in the prediction markets space claim that the current regulatory regime is “old school, and that they shouldn’t bother with it.” Miller then accused them of not caring about helping customers use their product responsibly.

He also said the companies don’t generate the same economic impact as those that are regulated.

“These operators have a word to describe what it means to ignore the rules, bypass the citizens, offer no community benefits and tell customers it’s OK to lose your shirt,” Miller said. “They call it innovation. I call it something else. It’s greedy, it’s reckless, and it’s irresponsible.”

Prediction markets flourish under Trump

As Miller set the stakes for the industry at the expo, Polymarket celebrated a $2 billion investment from the New York Stock Exchange’s parent company. That day, Polymarket CEO Shayne Coplan, 27, became the world’s youngest self-made billionaire, according to Bloomberg.

Just three years ago, the Commodity Futures Trading Commission reached a settlement with Polymarket to shut down its access in the United States for operating without a license.

And after the 2024 election, Coplan’s home was raided by the FBI for allegedly breaking that agreement, The New York Times reported. Coplan called it political retribution. Since President Donald Trump’s second administration took over this year, the federal government has been far kinder to him.

In July, the Justice Department and Commodity Futures Trading Commission dropped its investigations into the platform. It effectively approved Polymarket to resume operating in the U.S. last month under a different structure than it had in 2022, drawing Coplan’s compliments.

The Trump family is also getting involved in the industry. Donald Trump Jr. is now a strategic adviser with Kalshi and sits on Polymarket’s advisory board, with his venture capital fund investing in the company ahead of its U.S. return, Axios reported.

“People make a big deal out of Trump Jr. I just don’t think he’s moving the needle,” Gouker said. He believes the administration’s actions are aligned with its push for deregulation.

Trump nominated Brian Quintenz, a Kalshi board member, to head the Commodity Futures Trading Commission, but the nomination was withdrawn last month. Rep. Dina Titus, D-Nev., pushed for the agency to investigate the potential chair over his ties and stock holdings.

U.S. Sen. Catherine Cortez Masto, D-Nev., has noticed the change in tone from the agency. Cortez Masto joined a group of six other senators in a Sept. 30 letter to the commission questioning why the agency wasn’t doing anything about the sports prediction markets.

“Some companies are claiming to allow legal sports betting in all 50 states. This action — and the CFTC’s unwillingness to stop it — contradicts both the letter and the intent of the law,” the senators wrote. “The Commission cannot sidestep its statutory obligations.”

Part of the senators’ argument is that the commission can’t override state and tribal authority in regulating gaming. It’s a central question in ongoing lawsuits involving the prediction markets, lawyer Kevin King said on a G2E panel.

Courts “presume that Congress does not displace longstanding state authority,” King said. “If you had to get (the cases) down to a single sentence, it would be … ‘Has Congress clearly blocked states … from regulating these sports-based contracts?’ ”

King said courts would also have to consider whether the Commodity Futures Trading Commission is up to regulating this burgeoning field as well as if it’s possible to be compliant at both the federal and state levels.

“We’ve got a really big, complex picture here, and it’s only getting more complex,” King said, predicting that the first case involving prediction markets’ sports-based contracts would reach the U.S. Supreme Court as early as summer 2027.

There’s an earlier prediction on Polymarket, where there is a market for whether the Supreme Court accepts a case by the end of July 2026. Thus far, only a few thousand dollars have been traded on it.

https://lasvegassun.com/news/2025/oct/12/regulators-casinos-unite-against-new-gambling-gray/