The American Gaming Association (AGA) has called on Congress to prohibit prediction market platforms from enabling nationwide sports betting using contracts overseen by the Commodity Futures Trading Commission (CFTC).
During a testimony before a Senate Agriculture subcommittee, AGA’s Senior VP of Government Relations, Christopher Cylke, stated that platforms like Kalshi and Polymarket are exploiting federal event contract regulations to sidestep state and tribal gambling frameworks.
“Engaging in sports betting through prediction markets undermines the intentions of Congress,” Cylke expressed. “Congress aimed to ensure sports betting was not carried out in derivative markets. These offerings are essentially sports betting.”
Prediction markets categorize their sports betting offerings as financial contracts. Nonetheless, users wager on game results, player achievements, scores, and other related events for potential payouts. The AGA contended that this practice is functionally equivalent to sports wagering.
Kalshi reported a trading volume of $23.7 billion last year and $111 billion within the first half of this year, as per the testimony. Over 80% of this activity was related to sports, including an estimated $2.5 billion in World Cup transactions last month.
The platforms are accessible in areas that have opted out of sports betting or that have placed limitations on its offerings. The AGA indicated that this undermines state laws, tribal gaming agreements, licensing stipulations, and tax structures formed following the federal sports betting ban’s repeal in 2018.
Since the inception of sports contracts on prediction markets, states and tribes have experienced a loss of over $1.2 billion in gaming tax revenue, according to the association’s estimates.
Moreover, the AGA raised alarms regarding age restrictions and consumer protections. Unlike most regulated sportsbooks that require patrons to be at least 21, some prediction markets permit users as young as 18, with Kalshi disclosing that approximately 4% of its trading volume comes from users under 21.
During the first five and a half months of this year, prediction market operators constituted 45% of the digital sports betting advertisements that consumers encountered, without adhering to the responsible gaming advertising mandates set by states. The AGA reported that 78% of users engaging with sports contracts mistakenly believed that state gaming regulators could mediate disputes regarding these platforms.
A bipartisan coalition of 41 state attorneys general has also cautioned the CFTC that sports prediction markets evade state consumer protection laws and tax liabilities.
The AGA has urged Congress to redefine sports event contracts as gambling and to bar CFTC-registered platforms from offering them via self-certification.
“Taking action now will protect your constituents, honor tribal sovereignty, maintain state authority, ensure sports integrity, and allow the CFTC to focus on its designated mission,” Cylke concluded.
For the complete testimony, access it here.