The American Gaming Association (AGA) says US states and tribal communities have lost more than $1 billion in gambling tax revenue because of the rapid rise of prediction markets linked to sports events.
Speaking on CNBC’s ‘Squawk Box’, AGA president and chief executive Bill Miller said the growth of prediction market platforms is diverting money away from regulated sportsbooks and casinos that contribute tax revenue to state governments and tribal authorities. “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,” Miller said in the interview.
AGA calls prediction markets ‘backdoor sports betting’
Miller described prediction markets as “backdoor sports betting”, arguing that the products closely resemble traditional sports wagering but operate outside state gambling regulations. According to the AGA, prediction market platforms are effectively offering nationwide sports betting contracts without adhering to the same licensing requirements, tax structures and consumer protections imposed on regulated sportsbooks.
“We absolutely share President Trump’s view that America should be the crypto capital of the world,” Miller said. “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. 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.”
The debate centres on whether sports event contracts should be treated as gambling products regulated by states or as financial derivatives overseen by the Commodity Futures Trading Commission (CFTC). Several states have already filed legal actions against prediction market operators, claiming the platforms violate local gambling laws by offering sports-related contracts to residents without authorisation.
As I’ve said before, the @CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives.
— Mike Selig (@ChairmanSelig) May 28, 2026
That's exactly what we've done today by demanding Rhode Island cease its attempts to preempt federal regulation of prediction markets.
🗞️ Read… https://t.co/k7A3zOHgWf
However, the CFTC has pushed back strongly against those efforts, suing states that it believes are interfering with federal regulatory authority over derivatives and swaps markets. Most recently, the CFTC sued Rhode Island, making it the seventh state that the commission has taken a legal action against.
“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.”
Donald Trump backs CFTC authority over prediction markets
The political debate over prediction markets intensified this week after President Donald Trump publicly supported maintaining the CFTC’s jurisdiction over the sector. In a post published on Truth Social, Trump said it was “critically important” that the CFTC maintains “exclusive authority” over prediction markets and argued the industry should be protected as a growing part of the US financial system.
Trump described prediction markets as a strategic financial industry that the United States must defend against international competition. “It is critically important that the CFTC’s exclusive authority over Prediction Markets is maintained, and that they will thrive,” Trump wrote on Truth Social.
The Office of Management and Budget is currently reviewing a proposal that would formally expand the CFTC’s regulatory role over prediction market platforms. The regulatory uncertainty has become a major issue for both traditional gambling operators and financial technology companies entering the prediction markets sector.
Kalshi and prediction market coalition reject tax loss claims
Prediction market operators have strongly rejected claims that their products are equivalent to sports betting. The Coalition for Prediction Markets, which represents companies including Kalshi, Coinbase and Robinhood, challenged the AGA’s figures in a post on X, writing: “Sources not found.” The coalition argues that prediction markets provide broader economic and informational utility beyond gambling, including contracts tied to macroeconomic indicators, elections and financial events.
Error 404: sources not found https://t.co/nhIXs0Eeq4
— Coalition for Prediction Markets (@PredictAction) May 28, 2026
Kalshi spokesperson Elisabeth Diana also criticised the AGA’s estimate, accusing casino operators of attempting to protect their market dominance. “This is fake math from casinos, who are worried about losing their monopoly power,” Diana told CNBC. She pointed to the US gambling industry’s record $78.7 billion annual revenue as evidence that casinos remain financially strong despite the rise of prediction market platforms.
Prediction markets have seen explosive growth in the US. Recently, Kalshi widened its lead over Polymarket in weekly prediction market trading volume, accounting for 70.8 per cent of total activity during the week of May 18. The CFTC-regulated exchange processed nearly $4 billion in notional volume as Polymarket recorded a sharp weekly decline.
Kalshi posted $3.99 billion in notional volume during the week of May 18, up 3 per cent from the previous week, according to DeFi Rate’s volume tracker. Polymarket fell 15 per cent to $1.65 billion, down from $1.94 billion during the week of May 11. Combined weekly notional volume across Kalshi and Polymarket reached $5.64 billion for the week of May 18, down around 3.1 per cent from the previous week.
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