“Prediction Markets” Are Siphoning $1 Billion From State And Tribal Economies – Including South Dakota. By Bill Miller, President and CEO, American Gaming Association
In 2020, South Dakota’s voters decided to legalize and regulate sports betting, and a mere six years later, so-called “prediction market” platforms have engineered a backdoor into your legal, state- and tribal-regulated sports betting market. By rebranding sports bets as “event contracts” and “derivatives,” these platforms are mass-marketing sports betting as investing while evading the state and tribal regulations that govern the gaming industry and generate critical tax revenue.
South Dakotans know a sports bet when they see one. In fact, 81% of South Dakotan voterssay wagers offered by companies such as Kalshi and Polymarket are gambling — not investing. But what voters and policymakers may not realize is the quickly snowballing cost of this marketing deception: since 2025, “prediction markets” have already siphoned an estimated $1 billion in potential state gaming tax revenue that funds critical community projects in South Dakota and across America.
In 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA). This action gave states the authority to decide whether to legalize sports betting. Since then, 40 jurisdictions – including South Dakota – have done so and built sophisticated systems overseen by more than 8,400 regulators nationwide. Congress has also long recognized tribal sovereignty in gaming, as the Indian Gaming Regulatory Act (IGRA)established tribal authority to operate gaming as a means of self-sufficiency.
The state- and tribal-regulated sports betting industries generate significant public and tribal funding. In South Dakota, legal sports betting funds critical problem gambling services and tourism programs. Tribal gaming also serves as a key economic driver for tribal governments across the country, like the Sisseton Wahpeton Oyate Tribe’s Dakota Sioux Casino.
The funding for these community services and economies is being undermined by backdoor sports betting through “prediction markets.” In a recent Senate Commerce Subcommitteehearing, a US Senator asked if prediction markets are allowed to continue operating as unlicensed sportsbooks, will his state’s resources be diminished? The answer is yes.
Prediction markets claim they are offering financial derivatives – instead of a sports wager – and should fall under the regulatory oversight of the Commodity Futures and Trading Commission (CFTC), the agency that regulates markets critical to our nation’s economy. For generations, South Dakota’s farmers have used legitimate commodities markets to hedge real economic risk like weather and crop prices. That is fundamentally different than a bet on a Jackrabbits football game.
In a 2024 federal court filing, Kalshi – a “prediction market” operator whose volume consists of nearly 90% sports – admitted that Congress “did not want sports betting to be conducted on derivatives markets.” Now, prediction markets are offering exactly what they previously said they shouldn’t – even marketing it as “sports betting legal in all 50 states.” Just this year, media publication Sportico has noted that Kalshi also classified itself as “gambling” in their federal trademark request.
These platforms are making a mockery of Congressional intent by seeking CFTC oversight and bypassing federal and South Dakota law. When the argument was made at the Senate hearing, Senators from both parties scoffed, including Sen. Ted Cruz who stated that “many simply see prediction markets as a workaround to state gambling laws.”
Earlier this year, 41 state attorneys general, including South Dakota Attorney General Marty Jackley, sent a letter to the CFTC underscoring that it is sports betting and states have the right to oversee their own gaming industries according to local laws and values. This “prediction market” regulatory evasion is a burden for South Dakota taxpayers, and the problem – and the cost – will amplify if this is allowed to continue.
The legal gaming industry treats sports betting as strictly a form of entertainment. Framing it otherwise is misleading and irresponsible, particularly as prediction markets heavily advertise to students and 18-year-olds. We agree with Rick Wurster, the CEO of brokerage firm Charles Schwab, who said he does not “want young people in our country to think gambling on the Monday Night Football game is the same as investing in stocks and bonds.”
The legal, state- and tribal-regulated gaming market supports 1.8 million American jobs and $18 billion annually in tax revenue across the country. Licensed operators must meet strict standards for integrity monitoring, taxation, oversight, and consumer protections.
For decades, Congress and the courts have affirmed that gaming regulation belongs to states and tribal governments. We agree – along with the 41 attorneys general and countless legislators across the country – and support Attorney General Jackley in calling “sports event contracts” what they are: sports bets. We continue to urge Congress to reaffirm existing law and state and tribal authority by advancing solutions like the bipartisan Prediction Markets Are Gambling Act.
South Dakota chose to legalize, regulate, and tax sports betting. Your state’s decision should be respected. If it’s a wager on sports, it’s South Dakota’s right to regulate it. To protect consumers and assist local communities, the federal government must stop this prediction market evasion of state and tribal law before billions more in tax revenue is siphoned away.
