Pennsylvania challenges federally regulated sports prediction markets
The Pennsylvania Gaming Control Board has urged the state’s congressional delegation to press federal commodities regulators on the rapid spread of sports prediction markets, warning they threaten the state’s mature sports-betting framework and consumer protections. In a letter to U.S. Senators and House members, Kevin F. O’Toole of the Pennsylvania Gaming Control Board (PGCB) says the CFTC’s approach risks creating a confusing “dual-track” landscape with fewer safeguards for the public.
Kalshi, the federally regulated prediction exchange at the centre of the debate, operates in all 50 states, including those that have not legalised sports betting. The company recently reported $260 million in trading volume and 763,000 trades in a single evening of NFL and college football on 27 September, surpassing even U.S. election night activity. The company said it processed $441 million in trading during the opening week of the NFL season, including $200 million on Sunday alone. Those figures have raised eyebrows among state regulators who see them as evidence that the products function as mass-market sports betting by another name.
Who should regulate sports wagering?
Pennsylvania’s chief gambling regulator has stepped squarely into the debate over who should police the booming trade in sports prediction markets, writing to the Commonwealth’s two U.S. Senators and 17 members of Congress to raise alarms about “event contracts” that let users stake money on game outcomes under the umbrella of federal commodities law.
The PGCB disclosed that Executive Director Kevin F. O’Toole urged Pennsylvania’s representatives to lean on the Commodity Futures Trading Commission (CFTC) to confront what he calls the “inherent problems” of a system in which state-licensed sportsbooks coexist with private futures-style markets on sporting events. The regulator said the letter follows an April 2025 submission of written testimony to the CFTC.
O’Toole argues the rise of sports prediction markets threatens to undermine a state-led model that has been built out since the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) in 2018. As the PGCB puts it, “The ability of all states to offer sports wagering was established after the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (“PAPSA”) in May of 2018. Immediately thereafter, Pennsylvania moved to offer sports wagering products only through vetted and qualified licensees to bettors who were of legal age (21), and supported through implementation of strict but fair regulations on the operators.”
In O’Toole’s view, prediction markets are seeking to skirt that regime. “Sports prediction markets operate under the assertion that they are financial derivatives, or swaps, and therefore claim to not be gambling under state law,” he writes. “These markets effectively create a backdoor to legalised sports betting, operating parallel to, but outside of, the state-regulated system, and without strict oversight.”
Consumer protections at the heart of the dispute
The PGCB’s warning homes in on consumer safeguards that have become standard in state-regulated sportsbooks: strict age checks, responsibility tools, transparency in pricing, limits, self-exclusion and coordination with law enforcement and leagues on integrity threats. The regulator contrasts that with what it describes as a looser framework for federally supervised event contracts.
“O’Toole further states in his letter that such consumer protections are not required through futures markets since firms that offer sports wagering under the primary jurisdiction of the CFTC are not required to do so,” the press release says. It goes on to note that the CFTC historically oversees markets “where participants have been large and astute investors, not individuals as young as 18 seeking to ‘invest’ in the outcome of a football game,” and that “these prediction markets are typically self-certified by the private entities as compliant with federal law making them widely available with no review by the CFTC.”
The potential for regulatory gaps worries the PGCB chief. “The jurisdictional clash carries a significant risk of resulting in inconsistent and inadequate regulation,” O’Toole adds. “The CFTC’s framework is designed for derivatives markets often involving sophisticated institutional participants. In contrast, state gaming regulators prioritise consumer protection for the public, implementing detailed measures for responsible gaming, age verification, and problem gambling prevention.”
Those comments point to a wider jostling for jurisdiction now playing out in courts and policy forums across the country. (Elsewhere, attorneys general, tribal operators and state boards have pressed similar arguments as prediction platforms file new products and tout nationwide access.) O’Toole is blunt about the practical reality: “With all due respect to the CFTC, it would take years for them to create the regulatory system and oversight that state gaming authorities have in place, which would also create a redundancy for a system that already exists and works exceptionally well.”
A mature market says its rules work and shouldn’t be bypassed
Pennsylvania’s appeal lands as its regulated market reaches new highs. The PGCB this autumn reported another record year for overall gaming revenues, supported by 17 casinos, a network of retail sportsbooks and online operators, and a suite of consumer-protection programmes including self-exclusion and a push against unattended minors. The regulator has positioned that track record as proof the state regime can both grow revenue and protect players.
In that context, O’Toole’s letter frames sports prediction markets not as harmless financial novelties but as direct competitors to state-licensed books that operate without equivalent obligations. He warns that parallel systems could also complicate efforts to police match-fixing and misuse of insider information.
O’Toole expresses fear that average users will not grasp the difference between a federally supervised event contract and a state-regulated sportsbook account: “the continued availability of sports wagering through these commodity markets would create a parallel wagering ecosystem in which bettors may assume they have adequate protection, but do not, while offering significantly less oversight regarding potential match-fixing or the exploitation of insider information.”
“Even worse,” O’Toole concludes, “the parallel tracks risk confusing patrons who engage in these markets by utilising the veneer of a highly regulated market when, in reality, their markets are more akin to the ‘wild west’”.
What the PGCB wants to happen next
Pennsylvania’s regulator wants its congressional delegation to press the CFTC to acknowledge the risks of allowing sports outcomes to trade as commodity-style contracts without the safeguards that states require of sportsbooks. The board characterises the current situation as a “dual-track system of state-regulated legal sports wagering and purported futures trading on sporting events under the facade of federal regulation,” and says the federal approach invites regulatory arbitrage.
Don’t just read the news — stay ahead of it. Subscribe HERE to SiGMA’s Top 10 News countdown for stories shaping iGaming’s future, weekly insights from the world’s biggest iGaming community, and exclusive subscriber-only offers.
