The American Gaming Association is putting a price tag on what it sees as unregulated sports betting: $1 billion in lost tax revenue for states and tribes. The trade group, which represents casinos, sportsbooks, and tribal operators, says platforms like Kalshi and Polymarket are siphoning money that would otherwise fund community programs. AGA President Bill Miller took that message to CNBC this week, warning that the contracts on these sites increasingly look like sports wagers — but without any of the license fees, rules, or taxes that legal sportsbooks pay.
A billion-dollar dispute
The $1 billion figure isn't sitting well with the prediction market industry. Kalshi dismissed it as 'fake math from casinos,' and the Coalition for Prediction Markets claimed the AGA's underlying sources couldn't be located. The platforms argue they offer financial contracts on real-world outcomes, not gambling, and that the Commodity Futures Trading Commission already regulates them at the federal level. That arrangement lets Kalshi and Polymarket operate in all 50 states, including those where sports betting is banned or restricted.
State officials see it differently. They insist prediction market contracts are gambling and should face the same licensing and tax requirements as legal sportsbooks. New York, for example, taxes online sports betting at 51% and collected roughly $1.3 billion from it in 2025. The federal government adds a 0.25% excise tax on legal sports-betting handle. The stakes are high: the US gambling industry generated $78.72 billion in revenue and a record $18.09 billion in gaming taxes last year.
The regulatory split
Court rulings in prediction market cases have gone both ways, but the CFTC has consistently sided with the platforms. That has drawn the attention of 41 state attorneys general from across the political spectrum, who urged the agency to retreat from what they call regulatory overreach. Their concerns include consumer safety, game integrity, and who controls gambling. Tribal sovereignty is also a flashpoint: prediction markets circumvent exclusive gaming compacts that tribes have negotiated with states.
The gambling industry itself is starting to fracture over the issue. The AGA represents the established players who already pay into the state system, while the prediction market newcomers operate outside it. The dispute pits casino and tribal interests against tech-friendly platforms that argue they're just offering financial derivatives.
A bipartisan pushback
Senators John Curtis and Adam Schiff have introduced the Prediction Markets Are Gambling Act, a bipartisan bill that would bar CFTC-registered venues from listing contracts resembling sports bets or casino games. If passed, it would effectively shut down the sports-related portion of the prediction market business. The bill is the most direct legislative response yet to the clash between state regulators and federal agencies.
For now, the question is whether Congress will side with state officials and traditional gambling operators or with the platforms that see themselves as a legal form of event trading. The CFTC shows no signs of changing course, and the split court decisions leave the legal landscape uncertain. State and tribal gaming officials continue to push for a federal solution that protects their revenue and regulatory authority.
