Key Moments:
- Connecticut and Nevada authorities enforced state gambling laws against event-contract platforms in 2025
- Major operators like DraftKings, Fanatics, and Flutter launched or expanded prediction-market services in 2025
- The American Gaming Association’s position on prediction markets led to high-profile operator resignations
Regulation and Legal Showdowns Define 2025
In 2025, the US betting landscape saw prediction markets rapidly intersect with state gambling regulation. As various platforms received federal approvals and began offering sports-linked event contracts, regulatory questions erupted in states including Connecticut and Nevada. The central issue centered on whether these contracts represented financial derivatives, unlicensed sports bets, or products that straddle both categories.
This led to a regulatory standoff expected to heavily influence 2026, with federal oversight clashing against established state gambling frameworks. Operators, suppliers, and investors all watched closely as the direction of future industry growth depended on the outcome.
Connecticut: Enforcement Actions Spark a Landmark Case
Connecticut offered the starkest example of regulatory action in 2025. Early in December, state regulators issued cease-and-desist letters to Kalshi, Robinhood’s derivatives division, and Crypto.com, alleging they were providing unlicensed sports betting services via event contracts. State officials asserted that event contracts tied to team wins or player performances were functionally equivalent to wagers, regardless of their derivative structure.
Connecticut law restricts online wagering to a select group of licensees, notably tribal casinos and the state lottery, and places stringent requirements on age checks, integrity controls, and responsible-gaming tools. These standards, officials argued, were not adequately enforced by federally regulated platforms. Kalshi pushed back in federal court, maintaining its contracts belong under the Commodity Futures Trading Commission’s oversight, a position echoed by Robinhood and Crypto.com. The legal challenge in Connecticut could force platforms into a state-by-state licensing process or, if the court sides with exchanges, open a nationwide path under federal rules.
Nevada: Judicial Decisions Reinforce State Control
Nevada adopted a measured, deliberative approach throughout 2025, conducting workshops and hearings to weigh event-contract trading. In late November, a federal judge in Las Vegas ruled that Kalshi’s sports-linked contracts are governed by state gaming laws, granting Nevada regulators authority to treat these products as sports wagering and to restrict them unless they obtain state approval. Kalshi signaled intent to appeal, but the ruling bolstered state regulatory power.
Following high-profile casino cyberattacks in 2023, Nevada also increased scrutiny of digital risks, indicating that regulated betting products must conform to established licensing, audit, and oversight protocols. For B2B stakeholders, Nevada’s message is clear: the customer’s betting experience will dictate regulation, regardless of federal financial classification.
Corporate Expansion and New Entrants in Prediction Markets
| Company | Major 2025 Initiative | Regulatory Position |
|---|---|---|
| DraftKings | Acquired Railbird Technologies and its regulated event-contract exchange | Expanding into federally supervised, event-driven products |
| Fanatics | Launched Fanatics Markets prediction app across two dozen states | Operating in states without sportsbook presence using CFTC registration |
| Polymarket | Returned to US market with CFTC-compliant, sports-focused offering | Leveraging federal event-derivatives registration |
| Flutter Entertainment | Announced FanDuel Predicts in partnership with CME Group | Targeting states where online sports betting remains prohibited |
DraftKings made headlines by acquiring Railbird Technologies, owner of a CFTC-regulated event-contract exchange, marking a move into prediction markets and federally overseen event-driven products. DraftKings outlined plans for a “DraftKings Predictions” app, offering trading in real-world outcomes, including sports where legally feasible, and expanding product reach in states yet to legalize online wagering.
Fanatics accelerated its own efforts, rolling out Fanatics Markets in approximately twenty-four states, anchored by its acquisition of a CFTC-registered broker. Polymarket relaunched in the US with a model focused on sports while remaining CFTC-compliant. Flutter Entertainment followed suit with FanDuel Predicts, developed alongside CME Group, deploying the product in jurisdictions lacking online sports betting and maintaining operational separation from FanDuel’s core sportsbook.
Industry Friction and Shifting Alliances
As prediction markets gained prominence, longstanding gaming industry participants voiced concern that national, federally regulated exchanges offering sports event contracts could erode state-sanctioned exclusivity deals and undercut established consumer protections. The American Gaming Association (AGA) took a firm stance by categorizing prediction platforms as “still sports betting” and launching campaigns, such as targeted YouTube ads, accusing them of operating without proper regulatory review.
In turn, FanDuel, DraftKings, and Fanatics announced their resignations from the AGA, stating the association’s viewpoint no longer aligns with their own moves into federally regulated prediction markets. Meanwhile, digital-first operators countered that prediction markets increase transparency, liquidity, and product diversity absent from traditional fixed-odds betting channels. Undecided major operators continued to debate whether to pursue direct entry, forge partnerships, or wait for clearer regulatory outcomes.
Kalshi, PredictIt, and Trading Platform Crossovers
Kalshi expanded rapidly, attracting sizable funding and increasing its range of contracts to include not only sports, but also economic, weather, and political outcomes. Its multi-year partnership deals with major business news outlets set the stage for Kalshi’s probability data to become visible on television and digital media in 2026, potentially integrating event-driven markets into mainstream financial information.
However, Kalshi also became the main test case at the heart of enforcement activity in Connecticut and Nevada, as authorities explored the boundaries of state versus federal regulation. PredictIt, after resolving a legal dispute with the CFTC mid-year, remained a reference point for tightly scoped, politically focused prediction markets now operating under expanded federal authorization.
Traditional trading platforms Robinhood and Crypto.com also added sports-linked event contracts, but immediately encountered regulatory pushback from Connecticut, demonstrating the risks for mainstream brokers branching into event-based contracts tied to sporting outcomes.
The Year Ahead: 2026 Poised for Defining Outcomes
From aggressive state enforcement in Connecticut and Nevada to landmark corporate investments and strategic expansions, prediction markets have moved from niche status to a critical structural topic in US gambling. As 2026 approaches, unresolved questions remain over the future regulatory model: whether state law will govern all or if federal derivatives regulation will prevail in the event-contract space. Industry operators must determine the role of prediction markets within their portfolios, and technology providers face new compliance complexities in an environment where the definition of a “bet” remains contested.
Prediction markets now have a permanent place on the national agenda. How courts, regulators, and the industry respond over the next twelve months will determine whether these platforms become companions to sportsbooks, direct competitors, or the basis of a new hybrid of finance and gaming.
- Author
Daniel Williams
