States Push to Maintain Control Over Sports Betting Amid Growth of Prediction Markets
Coalition of States Supports Local Sports Betting Regulations
Nevada’s Attorney General, Aaron D. Ford, has played a leading role in a coalition consisting of 37 states and the District of Columbia. This group submitted a joint amicus brief to the United States Court of Appeals for the Fourth Circuit, emphasizing the longstanding authority of states to regulate sports betting activities within their jurisdictions.
Legal Dispute Over Prediction Market Platforms and Sports Betting
The key issue under review is whether federal regulation of certain event-contract platforms allows these entities to offer contracts based on sports outcomes without adhering to state licensing, taxation, and responsible gambling regulations. This dispute primarily involves prediction market platforms like Kalshi, which claim to operate under the federal designation of a Designated Contract Market (DCM) overseen by the Commodity Futures Trading Commission (CFTC).
Notably, the Trump family has associations with two major prediction market platforms: Kalshi and Polymarket. Polymarket is planning to return to the U.S. market following recent clearance from the CFTC.
These prediction markets argue their business models are financial trading activities rather than gambling. They maintain that their platforms are akin to derivatives exchanges where users trade contracts that pay out based on the outcomes of various events. Kalshi has recently established a research team to advance the understanding of forecasting through market data analysis.
However, states contend that the federal framework intended for derivatives markets should not be exploited to circumvent state gambling laws. They warn that allowing prediction markets to operate without state oversight could create a regulatory gap, enabling sports betting operations to function without necessary consumer protections and licensing requirements that have been developed over years at the state level.
Nevada’s Commitment to Protecting Sports Betting Regulation
Nevada Attorney General Aaron Ford, representing a state with a long history of sports wagering regulation, stressed that states have the expertise required to protect consumers, preserve the integrity of sports, and prevent issues like underage gambling. He emphasized that financial regulators at the federal level do not have the same experience or responsibility in this arena.
Ford expressed pride in leading a bipartisan coalition that underscores the importance of states retaining their regulatory powers. He stated that Congress did not intend to remove state authority over sports betting without explicit legislative action and cautioned that unregulated nationwide betting would disrupt the regulatory balance.
Currently, the coalition is advocating for the Fourth Circuit to uphold the existing regulatory framework that allows states to license and control sports betting. They support maintaining federal oversight focused narrowly on derivatives markets and oppose any federal overreach that would replace state gaming regulations.
