LAS VEGAS (KTNV) — The National Football League and Attorneys General from 39 states, including Nevada, want the U.S. Supreme Court to weigh in on prediction markets.
Sites like Kalshi, Polymarket, and Robinhood let people put money on outcomes, including sports events. The fight is over who should regulate them: states or the federal government.
Nevada says millions in gaming tax revenue and consumer protections are at stake.
Darcy Spears explains why Nevada regulators and even the NFL are asking the Supreme Court to take the case:
Prediction market sites say they're not sportsbooks. Nevada gaming regulators say if you're betting on sports, it's gambling, no matter what you call it.
Nevada regulators say those sites are taking sports bets without following the same rules that licensed sportsbooks must follow. The companies argue they're federally regulated financial markets that can be regulated by the Commodity Futures Trading Commission, and they're not gambling operations.
Nevada Gaming Control Board Chairman Mike Dreitzer says when the Commodity Exchange Act was originally put in place, that's not what Congress intended.
"The CEA is about regulating commodity derivatives such as corn and soybean futures. There are products that companies traditionally have used to hedge financial risk," Dreitzer said. "Sports bets are not commodity derivatives. They are for entertainment."
The CFTC says prediction markets should be treated like "swaps," which is defined as a financial exchange. The CFTC is now trying to change that definition. On Friday, the agency announced they have published an Interim Final Rule that codifies the CFTC's longstanding position that "casino-style gambling products, including wagers placed on sportsbooks and casino games, are excluded from the 'swap' definition."
"Casino-style gambling products are not derivatives," Chairman Michael S. Selig said in a statement. "Just as the CFTC has done with respect to other products historically regulated by the states, the Commission today provides clarity regarding the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the 'swap definition."
State lawmakers are already pushing back on that with Rep. Dina Titus agreeing with Dreitzer that's not the way the CEA was written.
Nevada Attorney General Aaron Ford says states have spent decades building safeguards for gamblers.
"We are the gold standard when it comes to gambling and gaming," Ford previously told Channel 13. "And at the end of the day, we have laws that are here to protect the gambler, to protect the industry, to ensure we have consumer protections in place."
Industry groups also point to the way these sites are marketing themselves.
"To the courts, they say we aren't sports gambling," Tres York, representing the American Gaming Association, told Nevada lawmakers during the Joint Interim Standing Committee on Revenue in August. "To the public, they willingly admit they are."
So, why should anyone care?
Because Nevada collects about $1.1 billion a year in gaming taxes.
Regulators argue if sports betting shifts to prediction markets that aren't taxed like sportsbooks, the state could lose money that helps fund public services.
"They're basically depriving the students and the kids of Nevada of better public education, better roads, better housing, Medicaid, all the state funding that tax dollars are being lost to the state of Nevada through Kalshi and other prediction markets not paying their taxes here," the Hon. George Assad said during a previous Nevada Gaming Control Board meeting.
Regulators also raised concerns about underage gambling and consumer protections.
"And unlike the majority of legal sportsbooks in the United States where the gambling age is 21 years old, on prediction markets, it's only 18. Every parent with a senior in high school or kids attending college should be immensely concerned about this," York said. "Prediction markets have been spending hundreds of millions of dollars in advertising both on the internet and social media directly to young people and many of the advertising would never be authorized by any state."
State gaming regulators say other areas of concern include money laundering protections, problem gambling, dispute resolution, and insider knowledge leading to unfair betting.
In August, a federal appeals court sided with Nevada, ruling that placing sports bets is still gambling, even if it's called something else. But in New Jersey, a federal court took the opposite stance.
Now, 39 attorneys general and the NFL are asking the U.S. Supreme Court to step in and settle the issue nationwide so everyone is using the same playbook.
The NFL said the uneven regulation of prediction markets across the country can "pose real challenges to game integrity and consumer protection." According to a court filing, attorneys for the league said the CFTC's "laissez-faire status quo" attitude to prediction markets "presents greater opportunities for scrupulous actors to cause mischief, trade on inside information, and harm game integrity>"
It's a stance the Nevada Gaming Control Board applauds.
"We are glad to see the NFL coming out in support of the states. The NFL recognized what is clear for all to see: Sports event contracts are gambling, and they should be regulated by the states, not the federal CFTC."
Channel 13 also reached out to Kalshi to see if they'd like to comment on the matter. They sent us the following statement:
"Kalshi’s top priority is the integrity of its markets. That priority is reflected in the fact that other major sports league and integrity partner in the United States is partnering with Kalshi—including the MLB, NHL, USTA and others. All but the NFL have been willing to share data and collaborate to protect game integrity.
Contrary to the NFL’s statements, the CFTC is actively policing sports-related markets, which are now listed on nearly every US commodities exchange. The CFTC’s ongoing rulemaking addresses many of the NFL’s supposed concerns. And those rules sit atop the same comprehensive system of federal enforcement that protects trillions of dollars of transactions in US markets.
We have consistently tried to engage proactively and constructively with the NFL to collaborate on market integrity with no response. We hope they change their position and start engaging to help ensure the integrity of sports.”
You may remember that President Donald Trump previously said it is "critically important" for the CFTC to have exclusive authority over prediction markets.
The Trump administration has personal interests in the outcome of these proceedings since Donald Trump Jr. is an investor and unpaid adviser to Kalshi and a paid adviser to Polymarket. His investment company, 1789 Capital, has also invested in Polymarket.
As for what happens next, Kalshi has until Nov. 9 to file its response in the case.
The U.S. Supreme Court is not expected to decide whether they will take the case until December.