The casino sector in Atlantic City is urging the U.S. Commodity Futures Trading Commission (CFTC) to take action against federally regulated prediction markets that offer sports-related contracts, which they argue contravene state gambling regulations. The Casino Association of New Jersey, representing the city's nine casinos, submitted their concerns to the CFTC, highlighting that the agency's proposed regulations could undermine established state and tribal gaming authority.
On Monday, the association specifically requested the CFTC to prevent firms like Kalshi and Polymarket from accepting sports bets, particularly in states where such betting remains illegal. This dispute is significant for traditional casino operators, who invest millions in licensing, taxes, and regulatory compliance under state gambling frameworks. The American Gaming Association estimates that the emergence of prediction market companies has led to a loss of over $1 billion in tax revenue for states.
Casinos argue that operators of prediction markets do not offer the same level of player protections that state-licensed gambling businesses are required to provide. In response, Kalshi defended its operations, asserting that the prediction market industry is federally regulated, fully collateralized, transparent, and subject to rigorous oversight.
Kalshi emphasized that sports event contracts serve the public interest more effectively than many traditional futures and swaps. Other organizations in the sports and gambling sectors, such as FanDuel, have also requested clarification on how the CFTC's rules will apply to sporting events, advocating for stringent monitoring and consumer protections for prediction market wagers.
The NFL has expressed concerns that the proposed rules do not adequately safeguard the integrity of sporting events and the interests of fans involved in these markets. They urged the CFTC to ban contracts related to events that could be easily manipulated and to impose restrictions on contracts based on non-public information, such as injury details and game strategies.
In response to the rise of prediction market platforms, several states have resorted to legal action to halt their operations, claiming that these activities violate state gambling laws, especially in areas where sports betting has not been legalized. New Jersey previously attempted to bar Kalshi from operating within its borders but was thwarted by a federal court ruling.
This legal battle follows New Jersey's landmark 2018 Supreme Court victory, which granted states the authority to decide on the legalization of sports betting. Since then, over two-thirds of states have opted to legalize it.
Derek Shaffer, an attorney for the Casino Association, noted that the Supreme Court justices unanimously agreed that states possess the authority to regulate or ban sports betting. He warned that a lack of federal enforcement against sports contracts could effectively allow sports betting to proliferate across the nation, disregarding state policies.
Shaffer argued that the CFTC's proposal would essentially endorse sports betting nationwide by not pursuing enforcement actions against any regulated market that chooses to list sports bets. This, he stated, would undermine the decisions of states like California and Texas, which have both opted to prohibit sports betting despite their differences. Furthermore, it would threaten the sovereignty of states and tribes that depend on gaming revenues for essential funding.