The American Gaming Association (AGA) has called on Congress to take action against prediction market platforms that are facilitating nationwide sports betting via contracts overseen by the Commodity Futures Trading Commission (CFTC).
During a testimony before a Senate Agriculture subcommittee, AGA's Senior Vice President of Government Relations, Christopher Cylke, highlighted that platforms like Kalshi and Polymarket are exploiting federal event-contract regulations to operate outside the traditional state and tribal gambling frameworks.
Cylke stated, “Sports betting on prediction markets undermines the intent of Congress. The legislative body did not intend for sports betting to occur on derivatives markets. These offerings are essentially sports betting, no matter how they are labeled.”
Prediction markets categorize their sports-related products as financial contracts. However, users wager money on various outcomes such as game results, player statistics, and scores, expecting a payout. The AGA contends that this practice is functionally equivalent to traditional sports betting.
According to the testimony, Kalshi reported a trading volume of $23.7 billion last year and $111 billion in the first half of this year, with over 80% of this activity related to sports. Notably, an estimated $2.5 billion was generated from World Cup betting in the last month alone.
These platforms continue to operate in areas where sports betting has been either banned or heavily regulated, which the AGA argues undermines state laws, tribal gaming agreements, licensing standards, and tax systems that were put in place after the federal sports betting prohibition was lifted in 2018.
The AGA estimates that states and tribes have lost over $1.2 billion in gaming tax revenue since the advent of sports contracts in prediction markets.
Additionally, the AGA expressed concerns regarding age restrictions and consumer protections. While prediction markets may allow users as young as 18, most regulated sportsbooks require customers to be at least 21 years old. Kalshi has reported that approximately 4% of its trading volume comes from users under the age of 21.
Moreover, operators of prediction markets accounted for 45% of digital sports betting advertisements viewed by consumers in the first five and a half months of this year, all while being exempt from state regulations on responsible gaming advertisements. The AGA noted that 78% of users engaged in sports contracts mistakenly believed that state gaming regulators could address disputes related to these platforms.
A bipartisan coalition of 41 state attorneys general has also cautioned the CFTC that sports prediction markets circumvent state consumer protections and tax responsibilities.
The AGA urged Congress to classify sports event contracts as gambling and to prevent CFTC-registered platforms from listing them through self-certification. “Taking action now will protect your constituents, honor tribal sovereignty, maintain state authority, preserve the integrity of sports, and allow the CFTC to concentrate on its designated mission,” Cylke concluded.