With prediction markets which offer sports-related contracts facing a mounting backlash from the U.S. gambling industry, the American Gaming Association (AGA) is warning that the platforms now sit at the centre of a wider fight over illegal betting in the nation.
Gambling is licensed state-by-state and has been banned or restricted in several jurisdictions; while prediction markets, overseen by the Federal Commodities Futures Trading Commission (CFTC) can operate nationwide.
But for the AGA this creates both a threat to state gambling rules — and an unfair advantage over licensed betting firms.
In its “State of the States 2026” report the AGA said regulators, tribal governments and local law enforcement had already acted against sports event contracts in 16 states during 2025.
Illegal Gaming Market
These actions ranged from cease-and-desist orders to lawsuits and formal opinions declaring the products to be unlicensed sports wagering.
The report places prediction markets alongside sweepstakes casinos, offshore sportsbooks and so-called skill games as part of what it describes as the illegal gaming market.
Online sweepstakes casinos, which used virtual currencies and prize-based mechanics to resemble online casino gambling, were pushed out of several key states last year, after a burst of legislation and enforcement.
AGA President and Chief Executive Bill Miller said the group had already helped halt sweepstakes operators.
“We confronted the illegal gaming market on multiple fronts,” he wrote in the report’s opening message.
“Working alongside state and tribal regulators, attorneys general, and law enforcement, we successfully stopped the advance of sweepstakes casinos and saw them pushed out of many key markets.”
Sweepstakes Ban
Five states (California, Connecticut, Montana, New Jersey and New York) passed laws in 2025 explicitly banning sweepstakes gaming platforms that mimic online casinos or sportsbooks.
Arizona and Louisiana also took enforcement action under existing law.
The AGA’s message is that prediction markets could follow the same path.
Added Miller: “[We] have mobilized the industry and our partners to address the growing threat of prediction markets offering sports betting outside of established state and tribal gaming law.”
The report argues that the issue goes beyond market share. It says the dispute “goes to the heart of the American gaming framework: consumer protections, responsible gaming standards, and the fair distribution of tax revenue depend on a clear, state-regulated system.”
For the AGA, the fight is also about public money.
Turning Point
The group says sports event contracts have now crossed a US$1 billion (£740m) threshold in lost state and tribal revenue — a market that it views as a turning point in the debate.
It argues that the money is being diverted through what it sees as backdoor sports betting markets operating outside state and tribal gambling law.
That revenue, the AGA says, would otherwise support education, infrastructure, public safety, responsible gambling programmes and other local services funded by the legal betting industry.
“It’s not about the AGA or the gaming industry, it’s about states and tribes that are losing literally US$1 billion in state and tribal revenue that would otherwise go to fund important community projects and pay taxes to these states,” concluded Miller.
