By Stephen Crystal – Schedule A Meeting with me at ICE 2026
In recent weeks, the world of sports prediction markets has been upended by a flurry of major developments. Several prominent sportsbook operators have unveiled or accelerated plans for new prediction market platforms, while regulators in multiple U.S. states are pushing back with legal challenges. At the same time, trading volumes and investment in these platforms are surging to unprecedented heights.
This rapid sequence of events is redefining how Americans wager on sports outcomes outside of traditional sportsbooks, setting up a collision course between innovative market platforms and long-established gambling laws. Below is a breakdown of the defining developments shaping the U.S. prediction market landscape—spanning Fanatics’ 24-state rollout, intensifying regulatory battles, and heavy investor momentum.
Major Sportsbooks Embrace Prediction Markets
Some of the largest operators in U.S. sports betting now view prediction markets as the next major growth segment, particularly in states where traditional online sports wagering remains illegal.
Fanatics became the first national sportsbook brand to launch its own prediction market app, introducing Fanatics Markets, a mobile platform that allows users to trade on outcomes ranging from sports games to financial indicators and pop culture events. The platform’s yes/no “event contracts” function like small-scale futures, priced between one cent and 99 cents based on likelihood.
Fanatics Markets launched in 10 states—including non-sports betting jurisdictions such as Alaska, Hawaii, Idaho, and Utah—and is rapidly expanding to 24 total states. Remarkably, this move gives Fanatics the first-ever national sportsbook-branded online presence in major markets like California, Texas, Florida, and Wisconsin, despite those states prohibiting mobile sportsbooks. By using a federally regulated commodities framework, Fanatics can operate in states long closed to traditional sportsbooks.
Following close behind, DraftKings and FanDuel announced they will launch their own prediction market platforms. Both companies left the American Gaming Association due to disagreements over prediction markets—an unprecedented split that signals their commitment to entering this space. DraftKings will introduce “DraftKings Predictions,” powered by a CFTC-licensed exchange acquisition, while FanDuel will launch “FanDuel Predicts” in partnership with CME Group.
These apps are designed to offer legal sports prediction contracts in nearly half the country, particularly in states without legalized sportsbooks. In regulated wagering states, they plan to offer non-sports markets like politics or macroeconomic events, avoiding overlap with their existing sportsbook products. The strategy: capture untapped demand in massive states like California and Texas while preserving traditional betting markets elsewhere.
Startups are scaling, too. Polymarket—known for yes/no crypto-based contracts—received federal clearance this fall, activated access to over 200,000 U.S. users, and debuted on national television. It now sits alongside Kalshi, launched in 2021, as a major regulated exchange.
Even fintech platforms are entering the arena. Robinhood recently launched a prediction markets hub that lets users trade event contracts through an interface similar to stock trading. These markets have quickly become Robinhood’s fastest-growing revenue segment, with billions of contracts traded monthly and revenues scaling toward a $300 million annual run rate. Crypto.com has also entered the space, supporting Fanatics Markets through its derivatives exchange.
Prediction markets have officially moved from niche curiosity to mainstream financial product.
State Opposition and Legal Battles Escalate
As platforms expand aggressively, state regulators have responded with equal intensity.
At least seven U.S. states have taken action to halt or restrict prediction market activity—particularly for sports contracts, which many states classify as unlicensed sports gambling.
A major flashpoint emerged when Connecticut issued cease-and-desist orders to three major platforms: Kalshi, Robinhood, and Crypto.com. The state argued these companies were conducting unregulated gambling and ordered them to halt activity for Connecticut residents and refund customer funds. Regulators emphasized their position that prediction markets are “wagers,” not investments.
Kalshi has been engaged in legal disputes across multiple states, including Maryland, Nevada, New Jersey, New York, and Ohio. Kalshi argues that its federally regulated status under the CFTC should preempt state gambling laws. However, a recent federal ruling in Nevada allowed state regulators to enforce their laws against Kalshi, weakening the company’s preemption argument.
Massachusetts has also filed suit seeking to block Kalshi from offering sports event markets, and a class-action lawsuit in New York alleges Kalshi’s sports contracts constitute unlicensed gambling. The central question remains unsettled: whether a federally designated event-contract exchange can legally operate across state lines without meeting each state’s gambling regulations.
Tribal gaming authorities have also pushed back. In states like Wisconsin and California, tribes argue that prediction markets violate their gaming compacts and bypass tribal exclusivity. A California court recently sided with Kalshi, ruling that CFTC-regulated contracts do not constitute wagers under California law—underscoring the fragmented legal outcomes emerging nationwide.
The American Gaming Association and many traditional operators openly oppose prediction markets, citing concerns around consumer protection, lost tax revenue, and market integrity. Estimates suggest that states could already be losing over $140 million in tax dollars due to prediction platforms operating outside the state-by-state licensing model.
This is rapidly becoming one of the most consequential legal battles in modern U.S. gambling history.
Surging Growth and Big Investments Underscore Momentum
Despite regulatory friction, the sector is experiencing explosive growth.
Kalshi closed a landmark $1 billion fundraising round, pushing its valuation to $11 billion. This was followed by major media partnerships, with outlets like CNN and CNBC integrating Kalshi’s real-time market data into news coverage.
Polymarket received major backing from Intercontinental Exchange, parent of the NYSE—another indication prediction markets are being viewed as mainstream financial instruments.
Consumer engagement is skyrocketing. Robinhood reported billions of contracts traded each month and saw prediction markets become its fastest-growing product in company history. Kalshi has also reported over a million contracts traded per day, while Polymarket’s national debut and high-profile media exposure are expected to accelerate adoption.
Fanatics markets are benefitting from the company’s massive built-in user base, integrating prediction markets into an ecosystem spanning merchandise, fantasy sports, and sportsbook operations. The platform mirrors the simplicity of a sportsbook interface while using familiar financial-style pricing—helping prediction markets feel immediately accessible to mainstream sports fans.
Sports leagues are watching closely. The NHL partnered with Kalshi and Polymarket as data partners, while the NFL has publicly urged caution. This divergence underscores how new the space is—and how unsettled the regulatory environment remains.
A Defining Moment — What Comes Next
Prediction markets have entered a defining and volatile chapter.
In the short term, more states are likely to pursue enforcement actions, particularly against sports-based prediction contracts. At the same time, operators will continue launching aggressively in new jurisdictions under federal authority, creating a constant push-pull between expansion and restriction.
Key questions are now in the hands of federal courts—and possibly Congress. The outcomes of cases in Connecticut, Nevada, Massachusetts, and New York may determine whether prediction markets become a nationally accessible exchange product or a patchwork of geo-restricted offerings.
Several trends to watch:
Federal vs. State Showdowns
Court rulings will determine whether federal oversight shields event-contract platforms from state gambling laws.
Sports as the Regulatory Flashpoint
Most legal pushback is tied to sports markets; operators may pivot toward non-sports categories in restrictive states.
Market Diversification
Future offerings may include contracts tied to crypto prices, IPOs, climate conditions, entertainment awards, and more—further complicating classification under gambling vs. financial law.
Mainstream Normalization
With major operators and fintech platforms involved, consumer adoption and media coverage are accelerating pressure for updated legislation.
Conclusion
The past month has transformed prediction markets from a fringe concept into one of the most important developing stories in sports betting, financial technology, and regulatory law. Billion-dollar investments, national platform launches, escalating lawsuits, and skyrocketing consumer adoption are converging all at once.
This is an industry expanding into dozens of states while simultaneously being ordered out of others—a dynamic unlike anything the U.S. betting sector has seen before.
With DraftKings and FanDuel preparing major launches and multiple legal rulings expected soon, the coming weeks will determine whether prediction markets can fulfill their promise as a nationwide, exchange-based alternative to traditional sports betting.
One thing is certain: prediction markets have arrived, and the game is officially on.
