The house is divided: Gambling industry splits over prediction markets
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A fissure has emerged in the gambling industry over prediction markets, with casinos crying foul, while online betting apps embrace the trend.
Why it matters: Prediction markets like Polymarket, Kalshi and Fanatics are spreading fast across the U.S. despite questions over their legality — putting fresh pressure on state-regulated sportsbooks.
- 39 states have legalized sportsbooks, but prediction markets are live in states that haven't done so — offering "event contracts" in areas like sports, entertainment and politics.
State of play: FanDuel, DraftKings and Fanatics have resigned from the Washington, D.C.-based American Gaming Association in the dispute.
- While the AGA — which represents major land-based casinos like the MGM and Caesars chains — has launched a marketing campaign blasting prediction markets as a threat to regulated gaming, all three sportsbook platforms are taking a very different tack.
Zoom in: Fanatics this week became the first major sportsbook to launch its own prediction market platform, Fanatics Markets, a partnership with Crypto.com. It's not available in states where Fanatics offers its state-regulated sportsbook.
- FanDuel and DraftKings, after months of hesitation, are now poised to launch prediction markets of their own.
Between the lines: The split is occurring around strategic realities.
- The land-based casinos fear running afoul with state gaming regulators, particularly in Nevada, where the gaming commission has assailed the rise of prediction markets as unlawful, gambling industry consultant Dustin Gouker tells Axios.
- MGM and Caesars also offer regulated online sportsbooks, but the lion's share of their profits come from physical casinos.
- "If they're putting their casino licenses in Vegas at risk, that's no bueno – that's terrible for them," Gouker says.
What they're saying: The AGA has placed ads on YouTube and on social media ripping prediction markets, saying "it's still sports betting" — hitting at the core of the legal dispute:
- Prediction markets' event contracts are regulated on the federal level by the Commodity Futures Trading Commission, whereas gambling is regulated by the states.
- Kalshi CEO Tarek Mansour told Axios this year that "I just don't really know what this has to do with gambling."
DraftKings said Friday in a statement that "as the company's business strategy evolves — including with prediction markets — DraftKings determined that its plans no longer fully align with the AGA's direction in certain areas and have decided to relinquish its membership."
- Fanatics Betting & Gaming CEO Matt King confirmed that the company had left the AGA.
- Reps for Caesars, MGM and FanDuel did not respond to requests for comment.
The intrigue: The prediction markets that never had regulated sportsbooks — that is, Kalshi and Polymarket — may have legal common ground with the betting apps, but they're not exactly comfortable bedfellows.
- Polymarket CEO Shayne Coplan last month blasted the "duopoly" of FanDuel and DraftKings as a "scam," telling Axios that the traditional sportsbooks "all rip off the consumer" and that "none of them innovate."
Reality check: There's still a question of whether prediction markets will be allowed to continue offering sports-related markets.
- They're facing legal pushback in states, like Nevada, that say they aren't licensed to operate there.
- King tells Axios that Fanatics is satisfied with the federally regulated status of its prediction market under the CFTC.
What we're watching: The major prediction markets have struck a series of deals in recent weeks, gaining what Gouker called "legitimacy and brand awareness" that enhances their cause in this ongoing dispute.
- Kalshi has made agreements this month to feature its prediction market data with CNN and CNBC.
- Polymarket struck a deal in November to share data with Yahoo Finance.
The bottom line: The house is divided.
