Why Is the Gaming Industry Rallying Against Prediction Markets?
Licensed iGaming operators are rallying against Kalshi, Polymarket and similar venues because prediction markets now take sports wagers nationwide — including in states where sports betting is illegal — without KYC, responsible gambling safeguards, state tax, or the advertising rules that regulated sportsbooks must follow, creating what industry leaders at the April 2026 East Coast Gaming Congress called an 'existential threat.'
The regulated gaming industry is rallying against prediction markets because operators like Kalshi and Polymarket have migrated from commodity and political event contracts into pure sports wagering — offering balls-and-strikes props, NFL touchdown markets and parlays — while operating nationwide under federal CFTC oversight rather than state gaming rules, meaning no KYC, no responsible gambling tools, no state tax contributions, and no advertising restrictions. At the April 2026 East Coast Gaming Congress (ECGC) in Atlantic City, panellists from Penn Entertainment, the Nevada Gaming Control Board and the Sports Betting Alliance described the category as an "existential threat" and called for co-ordinated action. A separate 39-state attorneys-general coalition has already filed to block event-contract sports betting in the courts.
The Core Grievance: Same Product, Different Rules
The regulated industry's argument is not that prediction markets shouldn't exist — it's that Kalshi and Polymarket are effectively running unlicensed sportsbooks under a commodities wrapper. Mike Dreitzer, chairman of the Nevada Gaming Control Board, put it plainly at ECGC: "When you risk money for the uncertain outcome of a sporting event, that's gambling. Taking away the word salad around prediction markets, it's gambling. And fundamentally, it has to be fair."
Sporttrade CEO Alex Kane, the panel's lone defender of the category, argued the exchange model is analogous to a commodities futures market — a peer-to-peer "all-to-all" venue where the platform is a broker, not a counterparty. Every other panellist rejected that framing.
The Specific Complaints
Industry leaders at ECGC and in related public statements consistently raise the same five issues:
1. No KYC or AML controls. Regulated operators are required to verify identity, monitor for money laundering and file suspicious activity reports. Prediction markets — particularly Polymarket — often onboard users with nothing more than a crypto wallet.
2. No responsible gambling safeguards. Deposit limits, loss limits, self-exclusion tools, reality checks and affordability screening are licensing-condition baseline in most regulated US and European markets. Prediction markets have none of these by default.
3. Nationwide availability, including in prohibited states. Kalshi is accessible in Utah, California, Texas and other states where sports betting is not licensed or outright illegal. Eric Schippers of Penn Entertainment: "Here is a product that has been declared unlawful in civil jurisdictions. Yet across the country, you're still seeing ads that say that this is lawful in every jurisdiction."
4. No state tax contributions. Regulated sportsbooks pay state gaming taxes that fund schools, treatment programs and enforcement. Event-contract markets pay federal regulatory fees but contribute nothing to state coffers, even as they absorb betting volume that would otherwise flow to licensed books.
5. Advertising free-for-all. Prediction markets ran what Schippers described as a "blitzkrieg of biblical proportion" during March Madness 2026, without responsible-gambling messaging or the advertising restrictions that licensed sportsbooks face in jurisdictions like the UK, Italy and Australia.
The "War Chest" Argument
Beyond product complaints, operators are reacting to the capital flowing into the category. ICE, the parent of the NYSE, invested US$2bn in Polymarket in late 2025. Kalshi has raised at comparable valuations. Dreitzer warned at ECGC that prediction companies are "building up a war chest of untaxed profits" with a strategy of becoming "too big to fail" before the issue reaches the US Supreme Court.
The concern is asymmetric economics: a licensed New Jersey operator pays state tax, AML overhead, responsible gambling compliance and affiliate restrictions, then competes for the same bettor with a federally regulated exchange that carries none of those costs.
What the Industry Is Asking For
The coalition position is relatively specific:
- Classification as gambling under state law, not as commodity trading — which would bring event-contract venues under state gaming regulators.
- Application of sports betting restrictions wherever a market accepts wagers on sporting outcomes, regardless of the contract wrapper.
- State tax parity so that any venue taking sports bets from a state's residents contributes on equivalent terms.
- Mandatory KYC, AML and responsible gambling baselines for any platform offering event contracts to US consumers.
Why Operators Should Watch This Closely
Whether the regulated industry wins or loses this fight will reshape the intelligence layer operators build around. If prediction markets are corralled into state gaming frameworks, sportsbook-grade surveillance, KYC and RG stacks become the mandatory floor — and licensed operators' existing compliance infrastructure becomes a structural advantage. If the CFTC retains exclusive oversight, the category will keep growing and operators will need to decide whether to compete with the model, partner with it (as LaLiga did with Polymarket), or lobby for a dual-licensing framework that lets them play on both sides.
Last verified: April 2026