Prediction platforms like Kalshi and Polymarket have been stealing headlines in the gaming industry for well over a year since they began offering sports event contracts.
This issue has become a hot-button topic among gaming commissions and most mobile sportsbooks, but the question remains: Will they be allowed to continue if the legal battle reaches the US Supreme Court?
Two Sides of the Coin
Sports event contracts are the lifeblood of Kalshi and Polymarket, but 15 months ago, such a product did not exist.
The companies that facilitate these contracts are called designated contract markets, and this industry has traditionally been a haven for traders who buy and sell contracts, speculating on economic indicators like whether the cost of gold, silver, or even pork bellies will go up or down.
But in January 2025, a significant pivot occurred, and Kalshi began offering contracts on the Super Bowl. Because they are under the federal authority of the Commodity Futures Trading Commission, they are permitted to operate in all 50 states, even those like California and Texas without sports-betting industries.
This decision has sparked a deluge of cease-and-desist letters by state gaming commissions throughout the nation, and subsequent legal battles have ensued. The prediction markets are cannibalizing a growing portion of the mobile sports betting profits, which in turn decreases the taxes generated from those sportsbooks by the state.
Although the prediction platforms have won the early legal rounds, state gaming commissions have recently been scoring rulings of their own. Nevertheless, the issue is far from legally settled, but the prediction markets continue to get oodles of funding from companies that have seen their meteoric rise and want in on the ride.
It has been reported that 90% of Kalshi’s trading is sports-related, and its valuation is now $11 billion, while Polymarket checks in at $9 billion.
As for the political winds, Donald Trump Jr. serves as a strategic advisor to both Kalshi and Polymarket, which would seem to indicate he has the blessing of his father, President Donald Trump. This certainly bodes well for the prediction market industry, but before it is assumed that sports event contracts are here to stay, we should note that this administration has less than three years remaining, and a new regime could be hostile to the practice, potentially leading to stricter regulations or even a ban on such markets.
Lastly, a definitive legal ruling has yet to be delivered, and although there is no guarantee that the US Supreme Court will hear the case, it appears it will ultimately be called upon to do so. And if the Supremes do agree to hear the case, it will likely be two to three years down the road, just about the same time the Trump administration will be walking out of the White House.
Caesars Says No to Creating Its Own Prediction Market
DraftKings, FanDuel, and Fanatics have employed the age-old adage, “If you can’t beat ’em, join ’em” pertaining to prediction markets.
All three initially took a stand against the companies encroaching on their territories and pilfering their market share, but then decided to launch their own prediction markets, much to the chagrin of the gaming commissions that hold their licenses.
All three have vowed not to operate their respective prediction platforms in states in which they hold sports betting licenses, but that has still not completely assuaged the sensibilities of the gaming regulators.
Caesars CEO Tom Reeg is acutely aware of this, and because his company has billions of dollars invested in brick-and-mortar casinos in addition to its mobile sports betting and iGaming platforms, he believes any juice derived from getting into the prediction market industry is not worth the squeeze.
“In the current regulatory environment, you shouldn’t expect us to be participating in prediction markets,” said Reeg on a fourth-quarter earnings call. “Some of our most valuable assets are our gaming licenses in each of the states that we operate, and it’s been made clear to us in a number of states that if we pursue that avenue, some of our brick-and-mortar licenses could be at risk. You shouldn’t expect us to do that.”
