Horse Racing and Prediction Markets: The Only Industry That Can Negotiate from Strength
Every other entertainment vertical watched prediction markets arrive uninvited. Horse racing is the one industry with the legal power to dictate terms, and what it does next will set the template for rights holders everywhere.
Prediction markets have spent the past 18 months expanding into virtually every tradeable category they can find. Politics, sports, music, art, real estate, crypto, economics. In almost every case, the pattern has been the same: the platform lists the contracts, volume builds, and the industry whose outcomes are being traded either participates on the platform’s terms or watches from the sidelines.
Horse racing broke that pattern.
In late April 2026, Polymarket opened a market on the Kentucky Derby. Within days, Churchill Downs reached out, and Polymarket pulled the contracts, refunded all trades, and removed the page entirely. Kalshi, the leading CFTC-regulated prediction market exchange, never listed Derby contracts at all. The 152nd running of the Kentucky Derby went to post on May 3 without a single prediction market contract active on any major platform.
That did not happen with the Super Bowl. It did not happen with the Oscars. It did not happen with Billboard chart positions or Spotify streaming milestones or art auction prices at Christie’s. In every one of those categories, prediction markets listed contracts without asking permission and traded hundreds of millions of dollars in volume. Horse racing is the only industry that stopped them.
Why Horse Racing Has Leverage Nobody Else Does
The reason is the Interstate Horseracing Act of 1978. The IHA is a federal statute that governs wagering on horse racing and grants track operators what Churchill Downs CEO Bill Carstanjen has described as “intellectual property rights in our content.” Under the IHA, any platform that wants to accept wagers on horse racing outcomes needs the consent of the host track, the horsemen’s organization, and the applicable state racing commission.
This is not a state regulatory challenge that prediction markets can litigate their way around, which is what they have done successfully in dozens of other jurisdictions. The IHA is a federal framework that operates independently of the CFTC’s authority over event contracts. When the National Thoroughbred Racing Association wrote to the CFTC arguing that horse racing event contracts should be prohibited as contrary to the public interest, they were invoking a legal structure that predates prediction markets by nearly half a century.
The practical effect is clear. Polymarket, a platform that has gone head to head with state regulators across the country and largely prevailed, chose to comply rather than fight Churchill Downs. That tells you everything about how seriously the platforms take the IHA’s legal exposure.
The Financial Stakes Are Real
This is not an abstract legal debate. The Kentucky Derby generated a $234.4 million pari-mutuel handle in 2025. Churchill Downs also operates TwinSpires, one of the largest advance-deposit wagering platforms in the country, and offers its own futures book on the Derby. Every dollar wagered through those channels supports purses, track operations, and the broader racing ecosystem.
Meanwhile, prediction market platforms are pulling handle away from traditional wagering across all sports. The American Gaming Association estimates that state-regulated sports betting has lost more than $418 million in handle to prediction markets. Tom Chignell, a consultant for the Hong Kong Jockey Club, reported that one prediction market site saw $1.2 million wagered on the 2025 Triple Crown races alone, none of which flowed back to tracks or purses.
The threat is real, and it will grow. Prediction market volumes are accelerating across every category. Kalshi cleared over $43 billion in total volume through early 2026. The platforms have institutional backing, regulatory momentum, and a CFTC chairman who has publicly voiced support for event contract markets. If horse racing does not act strategically, the pressure to open these markets will only intensify.
Resistance Alone Is Not a Strategy
The racing industry’s initial instinct has been defensive, and understandably so. Dennis Drazin, chairman and CEO of Monmouth Park operator Darby Development, has said he would take legal action against any prediction market that tried to list contracts on Monmouth races. He has already turned down a prediction market site that wanted to offer a proposition on the Haskell Stakes. Other industry leaders have discussed forming a class action defense.
Litigation may be necessary in some cases, and the 1/ST Racing court victory, a $3.6 million award against an unlicensed offshore site under the IHA, shows that the legal framework works when enforced. But pure resistance has a shelf life. The prediction market category is attracting too much capital, too much regulatory support, and too much consumer demand to be permanently blocked by legal threats alone.
The more instructive precedent comes from sports leagues. When FIFA, MLB, and the NHL recognized that prediction markets and event contracts were going to trade on their outcomes regardless, they did not simply resist. They negotiated licensing arrangements with CFTC-regulated exchanges. They licensed their brands, their data, and their event calendars on their own terms, and in doing so, they created revenue streams and maintained control over how their intellectual property was represented.
Horse racing is in a stronger position to do exactly this than any sports league ever was, because the IHA gives racing something no other industry has: a legal consent requirement. Sports leagues negotiated licensing deals voluntarily because it was commercially smart. Horse racing can negotiate from a position where the law requires prediction markets to come to them.
The Opportunity the Industry Is Missing
Michele Fischer, a wagering consultant and vice president of SIS Content Services, made an observation at the National HBPA conference in March that deserves more attention than it received. “We missed the mark with sports betting for the horse-racing industry,” she said. “Where are those opportunities for this new market we’ve been talking about for 20 years? Where are all the eyeballs that we wanted on horse racing?”
That question cuts to the core of what horse racing should be discussing. The industry has spent decades trying to attract new audiences, new bettors, and new forms of engagement. Prediction markets represent the fastest-growing form of regulated wagering in the United States, attracting a younger, digitally native audience that traditional pari-mutuel wagering has struggled to reach. Shutting them out entirely means shutting out the audience they bring.
A negotiated consent model could look something like this: track operators and horsemen’s organizations license their racing content to CFTC-regulated prediction market exchanges under terms that include revenue sharing tied to handle or volume, brand control provisions governing how races and tracks are represented, data standards ensuring settlement integrity, and contributions to purse structures. The IHA already provides the legal framework for this kind of arrangement. What is missing is the commercial will to explore it.
Drazin himself acknowledged this possibility when he said he could be open to “negotiating a proper rate of return” with prediction market sites in the future. That is the right instinct. The question is whether the industry moves toward negotiation proactively, while its leverage is at its peak, or waits until the legal and regulatory landscape shifts under it.
What the Rest of the Industry Should Learn from Racing
Horse racing’s position in the prediction market landscape offers a broader lesson that extends well beyond the track.
In every other non-endemic vertical, prediction markets have entered without needing consent. Kalshi listed art auction contracts without asking Christie’s. Polymarket trades on Oscar outcomes without a licensing deal with the Academy. Housing price contracts settle against public indices that no single institution controls. The rights holders in those industries are playing catch-up, trying to build content licensing layers and negotiating positions after the markets are already live.
Racing does not have that problem. The IHA means racing can set the terms before any contract is listed. That is an extraordinary advantage, and it is one that will not last forever if the industry does not use it. If the CFTC eventually issues explicit guidance on horse racing event contracts, or if the legal landscape shifts through court decisions in any of the 77 federal lawsuits currently pending against prediction market operators, the window for negotiated consent could narrow.
The organizations that move first, the track operators, horsemen’s groups, and industry associations that engage with prediction market platforms to design compliant, revenue-generating arrangements, will be the ones that protect their economics and expand their audience at the same time.
The Clock Is Running
Horse racing’s position is unique in the prediction market era: it has the strongest legal protection of any industry, the clearest consent framework, and the most direct ability to dictate commercial terms. That is a position of extraordinary strength. But strength without strategy is just stubbornness.
The prediction market industry is growing at a pace that dwarfs every other form of regulated wagering. The Kentucky Derby ran without prediction market contracts this year. Whether the same will be true in 2027, 2028, or 2030 depends entirely on whether the racing industry uses its leverage to negotiate from strength or spends it on resistance alone.
SCCG Management advises companies across the prediction market ecosystem and has deep experience in both racing-adjacent gambling verticals and prediction market strategy. If your organization is exploring what prediction markets mean for horse racing, we welcome the conversation.
Stephen Crystal is the Founder and CEO of SCCG Management, a global advisory and market representation firm powering the gambling industry worldwide. SCCGManagement.com
