The landscape of gambling and wagering in the United States is undergoing a seismic shift, as prediction markets transform everything from elections to football games into betting opportunities. In the past, if you wanted to wager on the outcome of a sporting event, you typically needed to be in a state with legalized sports betting and place your bet through a licensed sportsbook. But now, prediction markets—platforms that let users buy and sell contracts based on the outcome of real-world events—are rapidly expanding their reach, blurring the lines between traditional gambling and speculative forecasting.
According to Slate, this trend has been accelerating, with prediction markets turning not just sports, but politics and other domains into arenas for wagering. The proliferation of these platforms has not gone unnoticed by established players in the gaming industry, nor by state and federal regulators, who are scrambling to keep up with the evolving landscape.
One of the biggest names in sports betting, DraftKings, is reportedly considering a foray into the prediction markets space. As reported by Casino.org on October 6, 2025, DraftKings is weighing a variety of strategies to enter this burgeoning market. Jefferies analyst David Katz commented, "What DKNG is doing to prepare for entry into prediction markets; our impression is that a range of strategies are under consideration that could manifest in the immediate term should regulatory bodies at the state level permit." While Katz maintained a "buy" rating on DraftKings, he did lower his price target from $54 to $51, reflecting recent turbulence in the company's stock—which had dropped 16% in the week leading up to the report, largely due to NFL outcomes that favored bettors and hurt the sportsbook's bottom line.
The potential entry of DraftKings into prediction markets is not without risk. Unlike platforms such as Kalshi and Polymarket, which operate under federal oversight from the Commodity Futures Trading Commission (CFTC), DraftKings and other online sportsbooks are regulated at the state level. This creates a patchwork of rules and significant uncertainty. Several state regulators, including the Arizona Department of Gaming, the Michigan Gaming Control Board, and the Ohio Casino Control Commission, have already issued warnings that venturing into prediction markets could jeopardize existing sports betting licenses.
Despite the buzz, there's skepticism about just how much prediction markets could threaten the dominance of traditional sportsbooks. Sell-side data cited by Casino.org suggests that the volume of football-related event contracts on prediction markets is unlikely to come close to the handle seen by regulated sportsbooks this season. In other words, while the hype is real, the numbers may not justify the risks for companies like DraftKings—at least for now.
Still, the competitive pressure is mounting. Kalshi, one of the most prominent prediction market platforms, has been aggressively expanding its offerings. As of the previous week, Kalshi rolled out same game parlays for NFL games, a move that brings its product even closer to what traditional sportsbooks offer. This development, reported by EGR North America, has alarmed many in the gambling industry, who see it as a direct challenge to their business models and regulatory frameworks.
At the heart of the controversy is the regulatory gap between state and federal oversight. Prediction markets like Kalshi, Robinhood, and Crypto.com have been able to offer sports event contracts in all 50 states since December 2024, including those where sports betting remains illegal. This is possible because they are regulated at the federal level by the CFTC, rather than by individual states. However, some states, including Nevada and New Jersey, have taken legal action to try to block these platforms from operating within their borders.
The American Gaming Association (AGA), the industry's leading trade group, has been vocal in its opposition to prediction markets. On October 6, 2025, AGA Vice President of Government Relations Tres York spoke at the G2E conference in Las Vegas, warning that prediction markets pose a "massive threat" to the state-level regulation of gambling. York explained, "We view it as a massive threat to the state-level regulation of gambling that we have known over decades and decades and decades. Gambling has always been regulated at the state level, whether it’s land-based casinos, or river boats way back in the day; that has always been the case."
York's concerns go beyond regulatory turf wars. He highlighted the potential for integrity issues, especially in college sports, and the risk of student-athlete harassment. "There’s been a lot of discussions on student-athlete harassment, and deservedly so. The legal industry has been working with law enforcement, with the NCAA, with universities, to prohibit and prevent this. You can obviously look at integrity issues. These types of contracts, broadly speaking, in my general opinion, do not have much of that. And so, there’s a lot of concern on that front. And if the courts rule that these contracts are indeed legal, I think what we built over the last seven years, post-PASPA, would be severely undermined," York said, referencing the Professional and Amateur Sports Protection Act, which was overturned in 2018 and paved the way for legal sports betting in many states.
Public opinion appears to be on the side of tighter regulation. Research released by the AGA in September 2025 found that 80% of respondents believe that sports event contracts should be regulated just like other forms of sports betting. The AGA’s website states that prediction markets "openly flout sports betting’s state and tribal oversight in offering sports event contracts." This sentiment reflects a widespread unease about the rapid expansion of these platforms and their potential to undermine the hard-won regulatory framework established over the past seven years.
For DraftKings and its competitors, the situation is a delicate balancing act. On one hand, ignoring prediction markets could mean ceding ground to upstarts like Kalshi, especially if these platforms continue to innovate and attract users. On the other hand, jumping in too quickly risks running afoul of state regulators and jeopardizing valuable licenses in key markets. Some market observers believe that DraftKings’ caution could pay off in the long run, particularly in states like California where sports betting is not yet legal and compliance is paramount.
Ultimately, the best remedy for DraftKings’ current woes may be a reversal of recent NFL betting trends and a strategic use of its share buyback program, as suggested by analysts. But the broader question remains: as prediction markets continue to expand and evolve, can regulators and industry players keep up, or will the very nature of gambling in America be fundamentally altered?
As the lines between prediction and gambling blur, the stakes have never been higher. With state and federal authorities, industry leaders, and the public all weighing in, the future of prediction markets—and their impact on the American gambling landscape—remains uncertain, but undeniably consequential.
