According to a recent report by the American Gaming Association, states are missing out on approximately $1 billion in tax revenue due to the surge of prediction markets. Bill Miller, the group’s President and CEO, highlighted that these platforms are currently not subject to adequate federal regulation.
The ongoing debate regarding prediction market offerings, which provide yes/no event contracts, has intensified, leading to a growing regulatory conflict. This includes state gaming regulators, who argue that prediction markets are akin to gambling; the Commodity Futures Trading Commission, which is responsible for regulating this emerging sector at the federal level; and the companies managing these platforms, who assert that regulation resides solely with federal authorities.
The American Gaming Association (AGA), representing the licensed commercial gambling sector in the U.S., maintains that prediction market exchanges are depriving state and tribal governments of vital revenue that could have been allocated for taxes, infrastructure development, critical services, and community initiatives. Their live tracker reveals this number has surpassed $1 billion and continues to escalate.
The contention revolves around whether sports-related event contracts are classified as federally regulated swaps and derivatives or if they fall under sports betting products governed by state and tribal gaming laws.
Multiple states have filed lawsuits against platforms such as Crypto.com, Kalshi, and Polymarket, claiming they are offering sports wagering outside of local regulations. In response, the CFTC has initiated lawsuits against states it claims are overstepping their authority. For instance, Minnesota has outright banned prediction markets, which is currently facing a legal challenge from the CFTC.
On Tuesday, President Donald Trump took to Truth Social to advocate that the CFTC’s jurisdiction over prediction markets should be upheld. Additionally, the Office of Management and Budget is reviewing a proposal for the CFTC to regulate these markets.
According to Bill Miller, AGA President and CEO, on CNBC’s “Squawk Box” Thursday, 41 attorneys general have indicated that while the CFTC plays a significant role in the economy, it should not oversee national sportsbooks. He stressed that the core issue isn’t merely the AGA or the gaming industry, but the colossal revenue losses impacting states and tribes.
Bill Miller, AGA President and CEO
“This is about states and tribes losing an estimated $1 billion in revenues that could otherwise support essential community projects and tax contributions,” Miller stated.
Miller referred to prediction markets as “backdoor sports betting,” arguing that these platforms operate similarly to sportsbooks without adequate state oversight. The AGA has pointed out that these platforms evade voter approvals, lack consumer protections, and disregard state and tribal regulations, licensing requirements, and tax obligations.
Some states are considering tax measures in response to prediction markets. Kentucky is weighing a 17.25% tax on transaction fees for prediction market operators, while Iowa evaluates a permit fee of $20 million, an annual fee of $100,000, and a 20% tax on net revenue. Pennsylvania is exploring licensing fees and revenue taxes for yes/no exchanges.
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— Coalition for Prediction Markets (@PredictAction) May 28, 2026
Prediction market operators dispute the gambling comparison, asserting that their products offer legitimate economic benefits, including contracts linked to macroeconomic and political events. The Coalition for Prediction Markets, which includes platforms like Kalshi, Coinbase, and Robinhood, challenged the AGA’s estimate on social media, stating, “Sources not found.”
Elisabeth Diana, a spokesperson for Kalshi, also questioned the AGA’s figures, dismissing them as “fabricated statistics from casinos” and arguing that prediction markets are “more equitable, safer, and less exploitative than casinos.”