How the AGA’s Tribal-State Regulatory Alliance Against Prediction Markets Accelerates CFTC Preemption Fights and Alienates Sportsbook Operators

The American Gaming Association (AGA) has escalated its campaign against prediction markets. In its State of the States 2026 report and Gaming Industry Outlook Spring 2026 report, the organization frames event contracts as a threat grouped alongside sweepstakes casinos, skill games, and offshore operators.

AGA President and CEO Bill Miller wrote that the industry mobilized “to address the growing threat of prediction markets offering sports betting outside of established state and tribal gaming law.” He added that “this fight 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.”

This stance reflects a structural shift. It aligns traditional casino interests and many tribal governments with state regulators in defense of the post-PASPA framework. Yet it widens the divide with digital-first sportsbook operators who see prediction markets as both opportunity and competitive necessity.

AGA Escalates Anti-Prediction Market Messaging

The State of the States 2026 report places prediction markets in its “Illegal Gaming” section. It lists actions by 16 states in 2025, including cease-and-desist orders, lawsuits against operators, and regulatory opinions declaring sports event contracts unauthorized sports wagering.

Five states — California, Connecticut, Montana, New Jersey, and New York — passed legislation in 2025 explicitly prohibiting sweepstakes casinos. Indiana and Maine passed ban bills in 2026. Nevada passed legislation allowing regulators to pursue enforcement against such platforms.

The Gaming Industry Outlook Spring 2026 report, released the prior week, reinforced the message. 81% of gaming executives viewed prediction markets as a “very significant threat” to the regulated gaming industry.

46% of executives said federal regulatory concerns are limiting operations, up from 29% in Q3 2025. 42% cited competition from new forms of gaming as a major factor, up from 25% previously. The report estimates illegal gambling generates approximately $53.9 billion annually, depriving states of more than $15 billion in tax revenue. It notes these figures do not include the hundreds of millions in sports wagering tax revenue lost to sports event contracts.

These repeated linkages matter. They signal to lawmakers and courts that the regulated industry sees prediction markets not as innovation but as unregulated encroachment on state and tribal authority.

Industry Rift Emerges Over Prediction Markets

The AGA’s rhetoric has coincided with major operators exiting the organization. Over the past year, DraftKings, FanDuel, Fanatics, and Bet365 have all left.

FanDuel, DraftKings, and Fanatics have entered the prediction market sector. Executives from both DraftKings and Flutter highlighted prediction markets as potential customer-acquisition tools and growth opportunities in recent quarterly earnings calls.

In a statement regarding its departure, Bet365 said it pulled back “as a digital-first operator” due to the AGA’s “focus on the retail casino industry.”

This rift exposes deeper divisions. Traditional casino-aligned interests and many tribal stakeholders defend the state-regulated model. Digital-first operators pursue alternative wagering models that leverage event contracts for engagement and acquisition.

The timing is notable. 2025 marked the first year since the Supreme Court’s 2018 PASPA decision with no new state legalizing sports betting. Despite that slowdown, commercial sports betting revenue grew 22.6% year-over-year to $16.89 billion in 2025. State tax pressure continues, including Illinois’ first-of-its-kind tax on every mobile sports bet enacted in 2025.

Operators facing margin compression in core sports betting increasingly view prediction markets as strategic diversification. The AGA’s unified front risks accelerating their exit from traditional trade-group alignment.

Prediction Markets as the Next Major Regulatory Battle

Litigation is expanding across multiple states. Platforms such as Kalshi, Robinhood, and Crypto.com have faced cease-and-desist orders, lawsuits, and regulatory challenges. They have responded aggressively, filing federal lawsuits arguing that sports event contracts fall under federal commodities law and the Commodity Futures Trading Commission (CFTC)‘s exclusive jurisdiction.

The CFTC has intensified its own legal push. It has filed lawsuits against Arizona, Connecticut, Illinois, New York, and Wisconsin. The agency has also filed amicus briefs in cases in Nevada, Massachusetts, and Ohio.

This convergence of state-tribal-AGA opposition and CFTC-operator litigation creates an inflection point. Tribal gaming’s foundational role in the post-IGRA framework gives weight to arguments that event contracts undermine state and tribal sovereignty. Yet the CFTC asserts preemption where contracts qualify as commodities.

The battle is no longer abstract. Courts must now determine whether sports-event contracts sit outside the swap definition or fall squarely under CFTC authority. Outcomes will shape not only prediction markets but the boundary between federal commodities oversight and state-tribal gaming exclusivity.

Risks and Limitations of the AGA’s Approach

The AGA’s strategy carries risks. By grouping prediction markets with clearly illegal offshore operations and untaxed sweepstakes models, the organization may alienate the very digital operators it once partnered with during PASPA repeal.

Major sportsbooks have demonstrated that prediction markets can serve as acquisition tools without necessarily cannibalizing core sports betting revenue. If the regulated industry’s loudest voice frames these operators as part of the threat, it accelerates the industry divide rather than bridging it.

There is also a competitive limitation. While 81% of executives see significant threat, actual consumer behavior and court rulings may differ. Aggressive state actions have not halted platform growth or CFTC engagement. Overly broad framing risks painting legitimate innovation as inherently unlawful, potentially complicating future regulatory dialogue.

The Bottom Line

The AGA’s tribal-state regulatory alliance against prediction markets sharpens the CFTC preemption fight. It reinforces sovereignty arguments rooted in state and tribal law while highlighting the tension with federal commodities jurisdiction. At the same time, it widens the rift with sportsbook operators who have already exited the AGA and entered the space.

This is a defining moment for how the United States reconciles 20th-century gaming frameworks with 21st-century event contracts. Operators, tribes, states, and federal regulators all have stakes. Constructive paths forward require distinguishing legitimate innovation from unregulated competition while preserving consumer protections and tax revenue. The litigation trajectory will likely clarify these boundaries in the months ahead.