In the past 18 months, the adoption of products akin to sports betting within prediction markets has surged. Now, attention is turning to whether online casino-style event contracts will follow.
At the National Council of Legislators from Gaming States (NCLGS) Summer Meeting held in July in San Diego, Mike Dreitzer, chairman of the Nevada Gaming Control Board, raised alarm over the impending arrival of casino-style contracts. He urged state legislators to act swiftly rather than wait for a ruling from the Supreme Court regarding sports prediction markets.
"If you think they're not coming for online gaming in all 50 states, you’re wrong, because they are coming," Dreitzer asserted.
Casino-style event contracts have emerged as a new concern in the industry. Previously, discussions around prediction markets primarily revolved around sports, but the terminology has broadened. In February, Rep. Dina Titus of Nevada introduced the Fair Markets and Sports Integrity Act, aiming to prevent platforms from facilitating transactions involving "sporting or casino-style event contracts."
Last month, a letter signed by various organizations, including the American Gaming Association (AGA) and several tribal groups, urged the U.S. Senate to explicitly ban event contracts related to sports and casino-style gaming.
Titus’s legislation defines a "casino-style game" as any game usually found in casinos or gambling venues, encompassing slot machines, blackjack, roulette, and their digital versions. The same definition is mirrored in the Prediction Markets Are Gambling Act, recently filed by fellow Nevada Congress members, aiming to enforce similar restrictions.
The AGA frequently discusses the lost revenue attributed to the rise of prediction markets in the sports betting realm. AGA Senior Vice President Chris Cylke testified last week that his organization estimates states and tribes have forfeited over $1.2 billion in tax revenue due to the encroachment of prediction markets. However, other sources suggest that 69% of the volume on event contract exchanges comes from states without legalized sports betting, which may indicate limited competition with online casinos.
Looking ahead, projected figures suggest that by 2025, iGaming gross gaming revenue could reach an unprecedented $10.74 billion, significantly up from 2024's total of $2.59 billion in taxes. In contrast, the 30-plus online sports betting markets could generate $16.96 billion in revenue from a wagering handle of $166.94 billion, providing approximately $3.71 billion in taxes. Despite a slight dip in sports wagering revenue recently reported by the AGA, which fell 1.8% year-on-year, iGaming revenues saw a 14.7% increase, though growth rates have slowed. The AGA has not yet been able to quantify the potential impact of casino-style prediction markets on state-regulated gaming revenues.
The Commodity Futures Trading Commission (CFTC) recently proposed rules on prediction markets. While the guidelines indicate that event contracts linked to outcomes driven solely by chance may not be permissible, the language used remains vague. The CFTC suggested these contracts might lack meaningful informational value necessary for market decision-making.
Notably, several registered prediction market platforms have downplayed concerns surrounding casino-style products. The Coalition for Prediction Markets, including firms like Kalshi and Crypto.com, expressed willingness to support rules banning traditional casino-related offerings.
Concerns in the gaming industry were echoed at the NCLGS conference, where Howard Glaser, Light & Wonder’s Head of Government Affairs, warned that casino-style markets might soon become the next frontier for prediction markets.
"We would be foolish to sit on our hands and wait for the Supreme Court on this,” Glaser remarked. PENN Entertainment CEO Jay Snowden had previously emphasized similar anxieties on an earnings call, questioning what would prevent the introduction of prediction markets for various casino games.
SBC Americas reached out to several industry figures for insights on this topic, but received no comments. However, Chris Grove from Eilers & Krejcik Gaming suggested that expecting contracts on blackjack outcomes might be misguided. He speculated that prediction markets would shift toward creating engaging and entertaining trading overlays.
Dreitzer, representing the NGCB, underscored the need for vigilance against the advance of casino-style contracts, pointing to a five-reel product he encountered that used prediction contracts disguised as an online slot. He predicted that such products could proliferate, further complicating regulatory efforts. Drawing parallels with historical horse racing, he conveyed concerns that online prediction markets could converge with traditional casino gaming, resulting in unregulated gaming options readily accessible to consumers. He also noted recent similar products emerging from online gaming operators.
The potential intertwining of prediction markets and casino gaming continues to provoke worry among stakeholders committed to preserving state-regulated gaming integrity.
