The American Gaming Association now estimates that states have missed out on more than $1 billion in tax revenue due to the rise of prediction markets.
In an appearance on CNBC’s “Squawk Box” detailing the estimate, association president and CEO Bill Miller said that the lost money has consequences for communities due to the taxes states collect on regulated gambling.
“It’s about states and tribes that are losing literally a billion dollars today in state and tribal revenue that would otherwise go to fund important community projects,” he said, referencing the consequences on Native American casinos’ revenues too.
Miller — whose organization is an advocate for casino operators, manufacturers and employees — said prediction markets amount to “backdoor sports betting.” The only difference, in his view, is that they aren’t regulated in the same way as sportsbooks.
States have made a similar argument to Miller, arguing that prediction markets’ sports event contracts amount to sports gambling and thus should be regulated by their local frameworks. However, the Commodity Futures Trading Commission views these contracts as falling within its jurisdiction to regulate swaps and derivatives.
Signage is seen outside of the Commodity Futures Trading Commission headquarters in Washington, Aug. 30, 2020.
Andrew Kelly | Reuters
While states have sued several prediction market platforms, asserting that they’re violating state law, the CFTC has responded by suing states that it said are impeding on its regulatory power.
“We also believe that the CFTC has an important role to play in the financial space in and around commodities, precious metals, and other things,” Miller said. “Where we differ strongly is the belief that the CFTC is enabling these prediction markets to operate national sportsbooks with very little to no regulatory oversight.”
President Donald Trump said in a Truth Social post on Tuesday that it is important the CFTC’s jurisdiction over prediction markets is maintained. The Office of Management and Budget is also reviewing a proposal for the CFTC to regulate prediction markets.
Prediction market platforms argue that they’re not equivalent to sports betting. The companies say they have economic utility — like through contracts related to macroeconomic events and politics — and are not simply gaming.
In a post on X, the Coalition for Prediction Markets — which represents platforms like Kalshi, Coinbase and Robinhood — cast doubt on the association’s estimates. “Sources not found,” it wrote in response to the figure. The coalition didn’t immediately respond to a request for further comment.
In a statement, Kalshi spokesperson Elisabeth Diana also cast doubt on the numbers.
“This is fake math from casinos, who are worried about losing their monopoly power. Square that ‘math’ with the fact that the U.S. gaming industry reached a record high last year — $78.7 billion in revenue,” she said. “This is an industry that preys on people who lose. Of course they’re OK spreading lies. People are coming to prediction markets because they’re fairer, safer and less predatory than casinos.”
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.