A high-stakes turf war is erupting between America’s traditional gambling empire and the rapidly expanding world of decentralized and regulated prediction markets. The American Gaming Association (AGA) has launched an aggressive campaign, claiming that platforms like Kalshi and Polymarket are draining vital tax revenues from state governments and tribal communities.
The Scale of the Conflict
- AGA Claimed Lost State Revenue: $1,000,000,000+
- US Legal Gaming Revenue (2025): $78.72 billion
- State Gaming Taxes Collected (2025): $18.09 billion
- Prediction Market Monthly Volume (Early 2026): $20 billion+
The $1 Billion Tax Accusation
The AGA recently updated its public counter, asserting that states and native tribes have lost over $1 billion to prediction markets. AGA President Bill Miller took to mainstream media to warn that these platforms siphon off funds that would otherwise support local schools, infrastructure, and responsible gaming initiatives.
“These platforms are operating sports betting by another name, completely bypassing the state-level tax structures and consumer protections that legal sportsbooks have spent years establishing.”
Prediction market operators have quickly pushed back. Representatives from Kalshi dismissed the AGA’s figures as “fake math,” arguing that traditional casinos are simply terrified of losing their long-held monopoly on risk-taking. The Coalition for Prediction Markets also pointed out that the underlying data for the AGA’s billion-dollar claim remains entirely opaque.
The Jurisdictional Loophole
Because the Commodity Futures Trading Commission (CFTC) regulates prediction markets at the federal level as financial exchanges, these platforms can legally operate in all 50 states. This includes jurisdictions where traditional sports betting is heavily restricted or entirely prohibited, such as California and Texas.
A House Divided: The Gambling Industry Splits
The rise of event contracts has triggered a civil war within the gambling lobby itself. Industry giants DraftKings and FanDuel resigned from the AGA, followed closely by Fanatics. These operators are eager to launch their own federally regulated event-contract platforms, allowing them to bypass state-by-state licensing hurdles and reach previously inaccessible markets.
The Political Dimension
The debate has reached the highest levels of American politics. President Donald Trump publicly stated that it is “critically important” for the CFTC to maintain exclusive authority over prediction markets. This stance is complicated by family ties, as Donald Trump Jr. holds an advisory role at Kalshi and has financial ties to Polymarket.
Meanwhile, states are fighting back. Minnesota recently enacted a complete ban on prediction markets, prompting immediate federal lawsuits. Over 15 other states are currently drafting legislation to curb the expansion of these platforms within their borders.
FAQ
What are prediction markets?
Prediction markets are platforms where users buy and sell contracts based on the outcome of real-world events, ranging from political elections and economic indicators to sports games.
Why is the gambling lobby angry at prediction markets?
The gambling lobby argues that prediction markets act as untaxed sportsbooks, draining potential tax revenue from states and tribes while operating without state-level consumer protections.
How are prediction markets regulated?
In the United States, prediction markets are regulated at the federal level by the CFTC as derivatives exchanges, which allows them to bypass state-level gambling bans.
