The Kentucky Derby is set to take place this Saturday at Churchill Downs, drawing significant media attention. As always, prediction markets are also making headlines. Here’s our weekly summary of the gambling industry’s winners and losers.
The first Saturday in May signifies the iconic race at Churchill Downs. Although prediction markets will not be involved in the Derby, the excitement surrounding the NBA and NHL playoffs, along with the upcoming World Cup and football season, indicates that a substantial amount of sports betting activity in unregulated states is being funneled through these platforms.
In the meantime, the CFTC is considering new regulations for prediction markets, and during the public comment period that concluded on Thursday, it received numerous responses from various stakeholders. Professional sports leagues, players' unions, members of Congress, state regulators, tribes, gambling companies, financial institutions, and the prediction markets themselves all voiced their opinions.
Here’s a recap of the key stories impacting the gambling industry this week:
Bingo: Prediction Markets Embrace Economic Benefit Discussion
A trade group representing prediction markets submitted comments to the CFTC, stating that its members—such as Kalshi, Robinhood, Crypto.com, Coinbase, and Underdog—recognize that event contracts need to have a tangible financial aspect to be legally valid. While there are concerns that traditional casino games like slots and blackjack could eventually be offered on these platforms, the Coalition for Prediction Markets is advocating for the CFTC to classify casino-style games under its definition of “gaming,” which would effectively ban them from being offered. CFTC Chair Mike Seliger hinted during a discussion with Front Office Sports that player props and parlays might be placed on a “do not touch” list for prediction markets. Although they are not abandoning all sports contracts immediately, they are making gradual progress toward more sensible regulations.
Bust: California and Texas Remain Lagging
It may not seem timely to criticize states for their lack of sports betting legislation, but the recent release of Eilers & Krejcik Gaming’s Prediction Market Monitor highlights a significant issue. The report revealed that 69% of sports-event contract trading volume occurs in states without regulated betting, with California and Texas accounting for 43%. According to EKG’s analysis, prediction markets represented 11% of the online sports betting handle in March, with Kalshi ranking as the fourth-largest sports betting operator in the country for that month. This data serves as a reminder of the missed opportunities for states that have not yet legalized sports betting.
Bingo: Churchill Downs Blocks Prediction Markets
Churchill Downs Inc. has successfully taken action where other entities have not, effectively shutting down prediction markets. At the request of the horse racing venue, event contracts will not be available for the 152nd Kentucky Derby. Both Polymarket and Novig removed Derby markets shortly after they were launched, and Kalshi never offered them. NTRA President and CEO Tom Rooney, a former U.S. Congressman, invoked the Interstate Horseracing Act to warn prediction markets through a letter to the CFTC, indicating that this is a battle that the emerging but pressured companies are not willing to engage in.