Prediction Markets Capture NFL Share as States and Tribes Push Back on Legality

Prediction markets have surged in popularity during the NFL’s 18-week season. Eilers & Krejcik Gaming projects total NFL handle to reach $40 billion, with prediction markets expected to account for 21 percent of trading. Early app download data shows both Polymarket and Kalshi already ahead of DraftKings and FanDuel.

The developments arrive alongside fresh regulatory actions and a high-profile investigation into operator practices. Multiple states are testing the boundaries of legalized sports wagering rules enacted in 2021. Tribes are also asserting control over sports contracts on their lands.

AI Targeting of Problem Gamblers Draws Scrutiny

The biggest story involves DraftKings’ use of AI. A New York Times investigation detailed how the company applied data science to determine elasticity, or how much more a gambler might wager when offered specific promotions. Former DraftKings employees described the approach to the newspaper.

“The best investment would be a problem gambler.” “It is as predatory as it sounds.” “If you lose more, we give you more, so you keep playing more.”

DraftKings issued a statement rejecting any implication that its marketing practices are unfair or improperly target customers. The episode highlights clear risks when artificial intelligence meets player data and promotional targeting. Operators face potential reputational and compliance exposure if similar methods surface elsewhere.

Legal Tests Intensify for Prediction Market Operators

California tribes secured a win last Wednesday when the U.S. Court of Appeals for the Ninth Circuit overturned a ruling that had allowed prediction markets to offer sports contracts on tribal lands. The case returns to the U.S. District Court for the Northern District of California.

Connecticut’s Department of Consumer Protection issued nine cease-and-desist orders to companies operating prediction markets in the state. It also sent nearly 30 subpoenas to gaming service providers and media outlets. Governor Ned Lamont said prediction markets have branded themselves as legal and safe but “are not adhering to Connecticut’s consumer protection standards and gaming laws.” He added that the 2021 legalization of sports wagering aimed to create a safe, regulated market, “not to open a free-for-all.”

Underdog responded by suing the state’s attorney general and the Department of Consumer Protection. The company alleges the state is unlawfully exercising jurisdiction over prediction markets. Separately, the House Ways and Means Committee approved H.R. 10357 to block a federal tax rule that would reduce the gambling loss deduction to 90 percent from January 1, 2027. Rep. Dina Titus called it a commonsense fix to prevent taxing gamblers on phantom money.

Major leagues including the NFL, MLB, NBA, NHL and MLS sent a joint open letter to more than 35 U.S. gambling regulators urging lifetime bans on bettors who threaten or harass athletes and officials. The letter, seen by the Associated Press, argues a ban in one state should apply nationwide.

As detailed in iGaming Future, these stories reflect the friction accompanying prediction market growth.

The Legal Exposure Ahead

State actions and tribal litigation will likely force clearer jurisdictional lines. Prediction market platforms must weigh rapid product expansion against mounting compliance costs and the possibility of inconsistent enforcement across jurisdictions. Early leadership in app downloads may prove short-lived if regulatory uncertainty deters investment and user trust.

Reporting: iGaming Future

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