Strategy Memo
To: Regulatory Affairs and Government Relations Leads, US Licensed Sportsbook Operators
From: The Gaming Boardroom (TGB)
Subject: Prediction markets keep winning some states and losing others, and licensed sportsbooks are funding both sides of that fight
Date: 20 July 2026
Issue: On 8 July 2026, a federal judge denied Kalshi’s bid to block New York from enforcing gambling law against its sports contracts, yet the platform holds a preliminary injunction in Tennessee from February. With nearly 50 active cases spread across states including Nevada, Massachusetts and Tennessee, and the CFTC asserting exclusive federal jurisdiction over event contracts, prediction markets are trading in a genuine regulatory vacuum, one that is drawing volume from licensed sportsbooks while the litigation runs.
Context: Prediction markets took an estimated 5% of legal sportsbook handle in 2025, roughly $8 billion annualised, without the licence fees, state tax contributions or responsible gambling obligations that bind commercial operators. More than 36 states have already filed amicus briefs opposing federal preemption of their gambling laws, which shows how widely the fragmentation is spreading. Because rulings are splitting by state rather than converging, no operator can safely assume this advantage is temporary; it may just as easily become structural in the states where platforms keep winning.
Recommended Actions
1. Quantify handle and margin exposure to prediction markets state by state now, rather than waiting for one unifying appellate ruling that may not arrive this year.
2. Brief state government relations teams jurisdiction by jurisdiction, since Nevada, Massachusetts and Tennessee sit at different stages and need different arguments.
3. Draft a public position on the tax and responsible gambling asymmetry now, so the argument is not left to trade associations alone when a state legislative session moves fast.
Questions for Managers
1. What share of our handle in contested states is being displaced by prediction market volume, and how confident are we in that estimate?
2. If a controlling appellate ruling ultimately favours CFTC preemption, what does our competitive position look like without tax or licence parity?
3. Are we prepared to make the responsible gambling asymmetry argument publicly, given it invites scrutiny of our own compliance record too?
Sources
1. Courthouse News Service, ‘Kalshi loses bid to stop New York from regulating prediction markets’, 8 July 2026, https://www.courthousenews.com/kalshi-loses-bid-to-stop-new-york-from-regulating-prediction-markets/
2. Holland & Knight, ‘Prediction Markets at a Crossroads: The Continued Jurisdictional Battle Over Event Contracts’, February 2026, https://www.hklaw.com/en/insights/publications/2026/02/prediction-markets-at-a-crossroads-the-continued-jurisdictional-battle
3. iGaming Review, ‘Physical, digital, or both: the strategic choice dividing US casino operators’, 2026, https://igamingreview.com/physical-digital-or-both-the-strategic-choice-dividing-us-casino-operators/