National opinion: 'Prediction Markets' are siphoning $1B from state tribal economies – including Arizona

So-called “prediction market” platforms have engineered a backdoor into the legal, state- and tribal-regulated sports betting market. By rebranding sports bets as “event contracts” and “derivatives,” these platforms are mass-marketing sports betting as investing while evading the state and tribal regulations that govern the gaming industry and generate critical tax revenue.

Arizonans know a sports bet when they see one. In fact, 82% of Arizona voters say wagers offered by companies such as Kalshi and Polymarket are gambling — not investing. But what voters and policymakers may not realize is the quickly snowballing cost of this marketing deception: since 2025, “prediction markets” have already siphoned an estimated $1 billion in potential state and tribal gaming revenue that funds critical community projects in Arizona and across America.

In 2018, the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA). This action gave states the authority to decide whether to legalize sports betting. Since then, 40 jurisdictions — including Arizona — have done so.

The state- and tribal-regulated sports betting industries generate significant public and tribal funding. In Arizona, legal sports betting generates more than $53 million in tax revenue funding critical education and public safety programs. Tribal gaming also serves as a key economic driver for tribal governments across the country, like the San Carlos Apache Tribe.

The funding for these community services and economies is being undermined by backdoor sports betting through “prediction markets.”

Prediction markets claim they are offering financial derivatives — instead of a sports wager — and should fall under the regulatory oversight of the Commodity Futures and Trading Commission (CFTC).

In a 2024 federal court filing, Kalshi — a “prediction market” operator — admitted that Congress “did not want sports betting to be conducted on derivatives markets.” Just this year, media publication Sportico has noted that Kalshi also classified itself as “gambling” in their federal trademark request.

These platforms are making a mockery of Congressional intent by seeking CFTC oversight and bypassing federal and Arizona law. At a recent Senate Commerce Subcommittee hearing, Senators from both parties scoffed, including Sen. Ted Cruz, who stated that “many simply see prediction markets as a workaround to state gambling laws.”

Earlier this year, 41 state attorneys general, including Arizona Attorney General Kris Mayes, sent a letter to the CFTC underscoring that it is sports betting and states have the right to oversee their own gaming industries. Attorney General Mayes has also made her stance clear: "Kalshi may brand itself as a 'prediction market,' but what it's actually doing is running an illegal gambling operation and taking bets on Arizona elections, both of which violate Arizona law. No company gets to decide for itself which laws to follow."

The legal gaming industry treats sports betting as strictly a form of entertainment. Framing it otherwise is irresponsible, especially as prediction markets heavily advertise to students and 18-year-olds. We agree with Rick Wurster, the CEO of brokerage firm Charles Schwab, who said he does not “want young people in our country to think gambling on the Monday Night Football game is the same as investing in stocks and bonds.”

For decades, Congress and the courts have affirmed that gaming regulation belongs to states and tribal governments. We continue to urge Congress to reaffirm existing law and state and tribal authority by advancing solutions like the bipartisan Prediction Markets Are Gambling Act.

Arizona chose to legalize, regulate, and tax sports betting. Your state’s decision should be respected. If it’s a wager on sports, it’s Arizona’s right to regulate it. To protect consumers and assist local communities, the federal government must stop this prediction market evasion of state and tribal law before billions more in tax revenue are siphoned away.