Hawaii lawmakers are exploring the future of sports betting, casinos, and lottery products as they navigate a complex regulatory landscape regarding prediction markets. Despite repeated legislative failures to establish a legal sports betting framework, the conversation remains alive in the state, known for having some of the most restrictive gambling laws in the country.
A working group formed earlier this year is assessing the viability of introducing legal sports betting and other gaming options in Hawaii. Concurrently, lawmakers are considering whether to regulate or ban prediction market contracts related to sports and political events, particularly in light of a recent class-action lawsuit against Kalshi, a prediction market platform.
The class action highlights conflicting interpretations of prediction markets in Hawaii, where traditional gambling remains illegal but residents use federally regulated platforms to place bets on various events. This situation leads to a challenging regulatory environment, as lawmakers deliberate on how to approach this issue.
As discussions around sports betting evolve, the legality of prediction markets complicates matters further. Nationwide litigation seeks clarification on the jurisdictional divide over these markets, with cases expected to reach the U.S. Supreme Court. Amidst this, platforms like Kalshi offer contracts tied to real-world events, which some argue should be seen as federally regulated swaps, while state regulators advocate for categorizing them as gambling.
Efforts to formally address this matter were made with House Bill 2198 earlier this year, which sought to redefine gambling in the state to explicitly prohibit such event contracts. Although this bill did not pass, it reflected an understanding among lawmakers that prediction markets must be considered within the larger context of gambling regulation.
Several legislators appear poised to propose new legislation on prediction markets in the upcoming session. Sen. Lynn DeCoite, chair of the Economic Development and Tourism Committee, expressed support for taxing these markets, while Rep. Scot Matayoshi described sports event contracts as a regulatory loophole, suggesting that lawmakers weigh the options of both banning and regulating these contracts.
In an ongoing legal dispute, a Hawaii resident has filed a class-action lawsuit against Kalshi, claiming that certain contracts violate state law and consumer protection statutes.
In 2025, lawmakers established the Tourism and Gaming Working Group to assess the potential for economic development through gambling in the New Aloha Stadium Entertainment District. This group is tasked with providing findings and recommendations by January 20, 2027, stretching its analysis beyond just sports betting.
The group’s membership includes representatives from law enforcement and industry players like Boyd Gaming, DraftKings, and BetMGM. Advocates for legalizing sports betting argue it could bring existing gambling activities into a regulated, taxable environment, but opponents caution that Hawaii lacks the regulatory framework to manage the social impacts of expanded gambling.
In a recent meeting, Las Vegas gaming executives encouraged Hawaii to explore the integration of a casino within its tourism sector while also stressing the importance of addressing problem gambling through education and treatment funding.
Legislators have a roadmap for revisiting sports betting proposals. A proposal in 2025 received support in both chambers but ultimately stalled.
A working group's findings indicated broad support for a competitive market with multiple operators, estimating that legal sports betting could yield approximately $13 million in annual tax revenue. This vision echoes the provisions in the failed 2026 legislation, which sought to establish licenses for mobile sportsbooks and a tax rate of 15%. The repeated failures highlight ongoing questions about regulation, revenue allocation, and enforcement of illegal operations that Hawaii lawmakers will continue to grapple with as the 2027 session approaches.
