National struggle over gambling unfolds, marked by projection markets, unexpected partnerships, and a covert route to lawful sports betting: The ongoing battlefield in the world of wagers.
Hey there! It's a wild, wild world when it comes to sports betting in the States. Seven years ago, the Supreme Court did away with PASPA, giving 49 states the green light to legalize sports gambling, just like what they've been doing in Vegas all these years. But hey, not so fast! It looks like 21 states are still in on the party ban, including California and Texas, home to a fifth of all American folk.
But them pesky event-based prediction markets are shaking things up, sliding into the scene like a whisper of change. These online platforms function like your typical sportsbooks, offering futures contracts that change their prices and returns, mimicking sports betting odds.
So, what's the deal with regulating these new kids on the block? Let's dive into the ever-shifting, regulatory landscape of event-based prediction markets in the good ol' US of A.
Federal Oversight: The Commodity Futures Trading Commission (CFTC) Is Keeping an Eye On
Ever heard of the Commodity Futures Trading Commission (CFTC)? Well, they're the bigwigs tasked with regulating prediction markets. Unfortunately, these markets find themselves in quite a pickle, what with ongoing legal battles testing the CFTC's authority.
- Courtroom Brawls: Case in point, the fuss raised by Kalshi in 2024 and 2025. The CFTC initially rejected Kalshi's Congressional event contracts, citing state gaming law conflicts, but the courts later swung in Kalshi's favor. The case remains unresolved as of January 2025, with judges questioning the CFTC's regulatory scope.
- CFTC Leaders: Fret not, as CFTC leadership has hinted at re-evaluating rules and hosting roundtables to address the evolution of the market.
California: The Showdown of Sports Betting, Tribal-State Operators, and Prediction Markets
Welcome to California, the epicenter of drama. Sports betting legalization remains stalled due to disagreements between tribal and state operators, and prediction market platforms, like Kalshi and Crypto.com, find themselves caught in the crossfire. The local tribes, not too pleased with these platforms, have called for a united front against event contracts. Guess it’s back to the drawing board for now, since no direct state action has been taken yet.
But wait, what's this? Nevada slapped Kalshi with a cease-and-desist order in 2025 for offering sports event contracts, deeming them illegal under state law.
Texas: The Lone Star State Left in the Dark
Unfortunately, there's not much to spell out about Texas. Reports have been mum on any specific enforcement actions or legislation regarding sports-linked derivatives. However, the uncertainty surrounding the CFTC's unresolved stance casts a shadow over the Lone Star State.
Other States: The Gathering Storm
Across the nation, states are increasingly examining sports-linked derivatives, sometimes classifying them as gambling. Look out for more state scrutiny, as sports markets expand like wildfire.
Legal Ambiguity: The Cat and Mouse Game Between Courts, Regulators, and Prediction Markets
Is it gambling or a financial derivative? Courts and regulators are at odds when it comes to classifying event contracts. The taxman also plays a role, as winnings are currently taxed as ordinary income via the 1099-MISC form. Despite the risks, prediction market platforms like Kalshi are picking up steam, processing over $250M in election contracts in 2024 alone.
So, my friends, the wild, wild world of sports betting in the States keeps us all on our toes. Let the games begin! Just remember—18 and up, but read up first! 💥
- The Commodity Futures Trading Commission (CFTC), responsible for regulating prediction markets, is currently faced with ongoing legal battles testing its authority, as seen in the case of Kalshi in 2024 and 2025.
- In California, sports betting legalization remains stalled due to disagreements between tribal operators, state operators, and prediction market platforms like Kalshi and Crypto.com, causing some uncertainty and potential obstacles for these platforms.
- Texas remains one of the 21 states with a ban on sports betting, and the lack of specific enforcement actions or legislation regarding sports-linked derivatives, such as those offered by Kalshi, leaves the Lone Star State in a state of uncertainty, similar to other states across the nation that are increasingly examining these markets.
