Are Prediction Markets Gambling? US Lotteries Demand Regulation as CFTC Formalizes Sports Contracts
North American lottery organizations call prediction markets hidden gambling and push for urgent regulatory oversight, even as the CFTC moves to formally legalize sports event contracts and Wall Street projects $1.5 trillion in trading volume by 2030.
Updated July 2026
What Did the North American Lottery Associations Say About Prediction Markets?
The North American Association of State and Provincial Lotteries (NASPL), which represents more than 50 lottery organizations across the United States and Canada, issued a formal statement in July 2026 characterizing prediction markets as gambling that has been deliberately rebranded to avoid gambling regulation.
NASPL described these platforms as "an attempt to create a new type of gambling and conceal its true identity." The statement drew a functional definition of gambling that the organization argues prediction markets meet squarely: "If individuals stand to gain or lose something of value based on the outcome of a future event, then that activity meets the definition of gambling under many established legal standards." The association added that "even if there is some element of skill involved in the wager, the fact that chance can play a primary role makes the event a gamble."
NASPL's July statement aligned with a position paper issued by the World Lottery Association in May 2026, which also argued that any product offering a financial return contingent on the outcome of a future event, whether sporting, political, or otherwise, constitutes a wager or bet under gambling law.
What Regulatory Concerns Are Lotteries Raising?
Beyond the definitional argument, NASPL identified four categories of concern: sports integrity, consumer protection, public funding diversion, and regulatory arbitrage. On public funding, the association noted that prediction market operators currently avoid the state taxes on operational revenue and licensing fees that licensed lotteries and sportsbooks are required to pay, redirecting potential public benefit dollars away from education, infrastructure, and other programs that lottery proceeds fund in most US states.
The sports integrity concern mirrors arguments that state gaming regulators and professional sports leagues have raised about unlicensed betting products: platforms operating outside the oversight framework that licensed operators accept create blind spots for monitoring suspicious wagering patterns and enforcing market integrity rules.
NASPL and the WLA called jointly for urgent regulatory clarification across all jurisdictions where prediction market contracts are available, including functional and economic testing standards for individual products and mandatory licensing and regulation of prediction market operators as gambling businesses, regardless of how those operators label their own products.
What Is the CFTC Doing With Sports Event Contracts?
The Commodity Futures Trading Commission released a 267-page notice on June 10, 2026, formally proposing rules that would permit prediction market platforms to offer sports event contracts nationwide. The proposal would allow trading on outcomes including final scores, point differentials, win-loss results, tournament advancement, and individual or team statistical performance over a season.
CFTC Chair Michael Selig, a Trump administration appointee who has publicly supported prediction markets, has maintained that regulated prediction market platforms differ fundamentally from traditional sportsbooks in their operational structure, and that the CFTC, not state gaming regulators, is the appropriate federal authority for these products. The proposed rules opened a 90-day public comment period.
The proposal explicitly bans contracts on individual plays such as single pitches or shots, physical altercations, injuries, officiating decisions, pre-collegiate sports, and games of pure chance. The prohibited categories reflect an effort to separate sports event contracts from the prop-bet territory that gambling regulators, leagues, and consumer protection advocates have identified as most susceptible to manipulation and problem gambling.
How Do Prediction Markets Differ From Traditional Sports Betting?
| Feature | Licensed Sportsbook | Prediction Market (eg. Kalshi) |
|---|---|---|
| Regulator | State gaming commission | CFTC (federal) |
| Tax regime | State gambling taxes apply | Financial product rules (lower tax burden) |
| Market structure | Operator sets odds, takes the other side | Peer-to-peer exchange; operator earns fees |
| Available markets | Sports outcomes, props | Sports, politics, economics, crypto |
| Contract format | Decimal/fractional odds | Binary yes/no contracts priced 0 to $1 |
| Responsible gambling rules | Mandatory, enforced by state | Voluntary or subject to ongoing debate |
How Large Is the Prediction Markets Sector Right Now?
Kalshi, the largest US-regulated prediction market platform, generated $45 million in revenue in 2024, representing 400 percent year-over-year growth from 2023. The platform processed $2.5 billion in trading volume during the 2024 US election cycle alone, with trading volume growth of 450 percent from 2023 to 2024. Kalshi had 1.2 million registered users by the end of 2024, with 450,000 monthly active users and a post-Series C valuation of $2 billion.
Polymarket, which operates offshore and primarily serves international users through crypto-denominated contracts, generated comparable scale on political and macro markets. Together, the two platforms demonstrated that consumer appetite for prediction market products at scale exists, a finding that drew significant attention from Wall Street analysts heading into 2026.
What Does Macquarie Project for Prediction Markets by 2030?
Macquarie analyst Chad Beynon issued a projection placing prediction market trading volume at $1.5 trillion annually by 2030, roughly 50 percent above competing Wall Street forecasts. Beynon's model splits the total as $705 billion from sports markets and $783 billion from non-sports categories including political outcomes, cryptocurrency, and macroeconomic events.
At $1.5 trillion in trading volume, Beynon estimates total operator revenue of approximately $50 billion annually. A single platform commanding 30 percent market share at that scale could generate $7 billion in EBITDA, making prediction markets potentially one of the most valuable verticals in consumer finance. Beynon identified DraftKings, Fanatics, FanDuel, Meta Platforms, Polymarket, Robinhood, and Underdog as the companies best positioned to capture market share, noting that sportsbooks carry existing expertise and regulatory relationships that give them a credible transition path. The projection assumes "favorable regulatory conditions," a caveat that the NASPL and WLA statements make materially less certain.
Why Are Lotteries Specifically Worried About Prediction Market Growth?
State lotteries operate as quasi-governmental monopolies whose revenues fund public programmes. Any consumer gambling dollar that moves from lottery tickets to a prediction market platform is a dollar that bypasses the public benefit contribution that lottery operators are legally required to make. That dynamic is not hypothetical: online prediction market platforms offer a more engaging, higher-frequency product than most lottery games, and mobile accessibility makes the competitive pressure direct and immediate.
Prediction market platforms also do not currently carry the responsible gambling obligations that licensed sportsbooks and casinos accept as a condition of their licences. If the sector reaches the scale Macquarie projects while remaining outside state gambling oversight, the consumer protection gap widens alongside the public revenue gap, which is why lottery bodies have framed their regulatory ask as urgent.
Which Platforms Are at the Centre of the US Prediction Markets Debate?
Kalshi is the only major prediction market exchange currently operating under a CFTC-regulated framework in the United States. The platform offers contracts on a wide range of events from Federal Reserve interest rate decisions to NFL game outcomes. Polymarket is the largest by global trading volume but primarily serves international users through crypto-denominated contracts and does not hold a US licence.
DraftKings, FanDuel, and Robinhood have each signalled interest in prediction market products. DraftKings has existing infrastructure, player databases, and state-by-state licensing relationships that would give it a rapid path to market if CFTC rules are finalized. Macquarie's Beynon specifically named DraftKings and FanDuel as the companies to watch most closely given those established advantages. Meanwhile Democrats in Congress sent letters to the CFTC in April 2026 urging it to rein in prediction market platforms before finalized rules create regulatory facts on the ground that are difficult to reverse.
What Comes Next for Prediction Markets Regulation?
The CFTC's public comment period on its June 2026 proposal runs for 90 days, placing the comment deadline in September 2026. NASPL, state gaming commissions, professional sports leagues, and consumer protection groups are all expected to submit detailed objections or conditions. After the comment period, the CFTC must review submissions before publishing a final rule, a process that typically takes six months to two years.
In parallel, multiple state attorneys general and gaming regulators have indicated they will pursue their own classification proceedings, arguing that CFTC authority does not pre-empt state gambling law. That jurisdictional question, whether prediction market sports contracts are federal financial instruments or state gambling products, may ultimately require a court to resolve. Until it does, prediction market operators face a patchwork of state-level enforcement actions alongside a federal agency that has formally proposed to permit their core products.
For iGaming operators, payment processors, and affiliate businesses, the outcome will determine whether prediction markets emerge as the next major regulated vertical in North America or remain a contested grey area constrained by regulatory uncertainty.
Frequently Asked Questions
Are prediction markets legal in the United States?
Currently, Kalshi operates legally under CFTC oversight. The CFTC proposed rules in June 2026 to formally permit sports event contracts. However, state gaming regulators in several states argue that prediction markets constitute gambling subject to state law, creating a jurisdictional dispute that has not yet been resolved by courts.
What did NASPL say about prediction markets in July 2026?
NASPL, representing more than 50 lottery organizations in North America, issued a statement calling prediction markets "an attempt to create a new type of gambling and conceal its true identity." It called on regulators to classify and licence them as gambling products, citing concerns about sports integrity, consumer protection, and public funding diversion.
How much trading volume do prediction markets currently do?
Kalshi processed $2.5 billion in trading volume during the 2024 US election cycle. Macquarie projects the sector will reach $1.5 trillion in annual trading volume by 2030 if regulatory conditions prove favorable.
What is the CFTC proposing for prediction markets?
In June 2026, the CFTC released a 267-page notice proposing rules to formally permit sports event contracts on prediction market exchanges. The proposal allows trading on game outcomes and statistical performance while banning individual-play contracts, injuries, and officiating decisions. A 90-day comment period is underway.
How do prediction markets differ from sports betting?
Prediction markets operate as peer-to-peer exchanges regulated by the CFTC as financial instruments, paying lower taxes than state-licensed sportsbooks. Licensed sportsbooks are regulated by state gaming commissions, pay state gambling taxes, and carry mandatory responsible gambling obligations. The distinction in regulatory treatment is at the core of the lottery industry's objections.
Who are the main prediction market platforms?
Kalshi is the largest CFTC-regulated platform in the US. Polymarket is the largest globally by trading volume but operates offshore. DraftKings, FanDuel, Robinhood, and Underdog have been identified as likely entrants if federal rules are finalized.
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