The American Gaming Association website has been counting for months, tracking what the casino and sportsbook lobby says states and tribes have lost to the prediction markets. On Thursday, the mark passed $1 billion, and the AGA moved quickly to make headlines, with President Bill Miller warning on CNBC that states and tribes were losing money that would otherwise fund community programs.
Platforms like Kalshi and Polymarket let people trade contracts based on real-world results, and a rapidly growing part of that activity comes down to sports betting via a different route, with users buying yes-or-no positions that equate to the odds on questions like who will win Sunday’s game.
Because the Commodity Futures Trading Commission (CFTC) regulates them at the federal level, these platforms have been able to operate in all fifty states, including those where traditional sportsbooks are severely restricted or even banned entirely. State officials have insisted for more than a year that the contracts are gambling and that they must live under the same licenses, regulations and taxes that every legal sportsbook already pays.
The claim that these platforms have led to a billion dollars in lost tax revenue amounts to a close jurisdictional battle that boils down to something the average voter can easily understand.
However, it also comes at a pretty inopportune time for the US gambling industry, as it just completed its best year ever, with $78.72 billion in revenue and a record $18.09 billion in gambling taxes for 2025.
One of the most profitable industries in America right now is the one telling Congress it’s being robbed. The AGA exists to represent the casinos, sportsbooks and tribal operators that already pay into the state system that the prediction markets are accused of skipping, which is one reason why its estimate carries political weight.
The platforms, in turn, dismissed the figure as fabricated, with Kalshi calling it “fake math from casinos” fearful of losing their monopoly, while the Coalition for Prediction Markets dismissed the estimate, saying the AGA’s underlying sources could not be pinpointed.
The argument against prediction markets
The states are having trouble getting people on board with their philosophical arguments against prediction markets. The court rulings in almost every case involving the prediction market have been divided, and the CFTC continues to side with the platforms in every new case brought before regulators. CryptoSlate has previously covered the jurisdictional battle between US states and the CFTC, and there appears to be no end in sight to the ongoing war.
A dollar figure puts an end to that, especially if it’s more than a dollar billion dollars, because governors, attorneys general, and all manner of regulators and legislators can point directly to education funds, pension incentives, and responsible gaming programs and tell voters that’s where the billion is coming from.
The size of the gambling market is best seen in New York, where online sports betting is taxed at a rate of 51%, the highest rate in the country. Despite the insanely high tax rate, the state took in about $1.3 billion in 2025.
The federal government already collects a 0.25% excise tax on legal sports betting, which AGA claims exists to tackle illegal bookmaking. Considering the insane revenues reported by gambling companies, even this tiny tax represents a significant revenue stream for the government. This means we’re unlikely to see any kind of meaningful support for the prediction markets coming out of Washington, so the industry will have to take its chances at the state level.
Lawmakers seemed to expect that: In March, Senators John Curtis and Adam Schiff introduced the Prediction Markets Are Gambling Act, a bipartisan bill that would ban any CFTC-registered venue from including a contract that resembles a sports betting or casino game. Pressure on the agency has also increased from the states, with 41 attorneys general from across the political spectrum urging the CFTC to pull back from what they describe as excessive oversight.
The lost tax revenue is a blow to voters, but it’s just part of a much longer list of concerns, including consumer safety, gaming integrity and who gets to control gambling in the first place. When someone places a bet through a licensed sportsbook, there’s a whole apparatus of state surveillance involved: a complaints procedure if a payout goes sideways, safeguards for responsible gaming, and surveillance designed to spot match-fixing or insider activity. These protections only reach the federally regulated platforms at the edges, if they reach them at all.
There is also the issue of tribal sovereignty, as many states have given tribes exclusive gaming rights through negotiated agreements that the prediction markets are completely bypassing. Meanwhile, tensions have risen so high that the gambling industry is beginning to split against itself, and the White House is being drawn directly into the middle of the matter.
The rift within the gambling world
This is such a complex problem that the sector does not seem to be taking a position.
DraftKings and FanDuel both resigned from the AGA in November, while Fanatics left in December after launching their own event contracting platform, all attracted by the way federally regulated contracts allow them to reach customers in states where their conventional sportsbooks cannot.
Incumbents championing the state-regulated model and operators taking the federal route are now pursuing opposite outcomes. As a result, the AGA represents an increasingly thin coalition of land-based casinos and tribal operators against a new wave of companies that used to sit at their own table.
The political discourse also escalated this week, when President Trump posted on Truth Social that it was “critical” for the CFTC to maintain exclusive authority over the prediction markets, a position complicated by his son Donald Trump Jr.’s paid advisory role. at Kalshi and his investment in Polymarket.
The government has litigated hard to support that position, with the CFTC suing Arizona, Connecticut, Illinois, New York, Wisconsin and Minnesota. Minnesota recently became the first state to pass an outright ban on prediction markets under a bill signed by Governor Tim Walz, prompting a federal lawsuit to block the ban before it goes into effect on August 1. Minnesota’s law is part of a much broader push, with at least 15 states introducing legislation this year to rein in the platforms.
But beneath all the political action and legal noise lies the reason why prediction markets matter in the first place: sheer volume. Monthly trading on the prediction market rose from about $1.2 billion in early 2025 to more than $20 billion in early 2026. It’s an unprecedented growth rate, even in the crypto industry, and it led to a $2 billion investment from Intercontinental Exchange in Polymarket, valuing the company at $8 billion.
The US gaming industry posted record revenues and asked Congress and the courts to treat a billion-dollar estimate, which the platforms dismiss as fabricated, as a public emergency. Prediction markets want to win treatment as a financial exchange market, while the AGA is working hard to recast them as tax-free sports betting; a fight that many expect will reach the Supreme Court.
Either way, the next phase will play out in the places the association keeps pointing to: the statehouses, the attorneys general’s offices, the tribal governments and the congressional committees that are now watching a burgeoning market expand far beyond their reach.