Gaming association says states have lost $1 billion in tax revenue due to prediction markets

• AGA CEO Bill Miller claims prediction markets operate as 'backdoor sports betting' with minimal regulatory oversight, despite the majority of their business volume coming from sports-related event contracts
• States have sued prediction market platforms for violating state gambling laws, while the CFTC has counter-sued states for impeding its regulatory authority over swaps and derivatives
• President Trump posted on Truth Social supporting CFTC jurisdiction over prediction markets, while the OMB is also backing the CFTC's regulatory role

Summary

The American Gaming Association (AGA) estimates states have lost $1 billion in tax revenue due to prediction markets, which the organization argues function as unregulated sports betting platforms.

Key Players and Positions:

AGA President and CEO Bill Miller contends prediction markets represent "backdoor sports betting" that lacks proper regulatory oversight. He argues these lost revenues would otherwise fund community projects and support Native American casino operations. The organization advocates for traditional casino operators, manufacturers, and employees.

Regulatory Dispute:

A jurisdictional battle exists between states and the Commodity Futures Trading Commission (CFTC). States argue prediction market sports event contracts constitute sports gambling requiring state-level regulation. The CFTC claims authority over these contracts as swaps and derivatives. States have sued prediction market platforms for violating state law, while the CFTC has countersued states for interfering with its regulatory power.

Political Support:

President Donald Trump posted on Truth Social Tuesday supporting CFTC jurisdiction over prediction markets. The Office of Management and Budget also backs CFTC regulation.

Industry Defense:

Prediction market platforms dispute equivalence to sports betting, claiming they provide economic utility through contracts on macroeconomic events and politics. However, Miller argues the majority of prediction market volume derives from sports-related contracts, undermining their financial investment positioning.

Market Implications:

The dispute could reshape regulatory frameworks for emerging financial products and impact revenue streams for both traditional gaming operators and prediction market platforms. Resolution will determine whether states can recapture tax revenue and how prediction markets operate going forward.

*Note: CNBC disclosed a commercial relationship with prediction market platform Kalshi.*