The Takeaway: Did Congress Intend To Legalize Sports Betting Through Prediction Markets?
Gambling news roundup: Ohio governor wants to kill prop bets; AGA releases sweepstakes casino survey and report; MyPrize valued at $250M
Every Thursday in The Takeaway, The Closing Line provides commentary on trends and news in the gambling industry.
Did Congress intend to legalize sports betting through prediction markets? The short answer: No. You can stop reading now and move on to the roundup if you’d like.
You want the long answer? OK, I do have to write a newsletter today.
Today’s post is triggered by this tweet thread (and by extension amicus brief) from the chief legal officer of Paradigm (a Kalshi investor):
Yesterday we filed an amicus brief urging the Third Circuit to block NJ's attempt to regulate federally-overseen prediction markets. Congress gave this turf to the CFTC and states don't get a veto … It's not a close call - 50-state chaos in prediction markets is exactly what Congress sought to stamp out.”
You can see the amicus brief here.
Kalshi has a pretty good legal case, as evidenced by their early wins in cases against New Jersey and Nevada. Attorney Andrew Kim has outlined the strength of that case in various posts over at The Event Horizon.
But this is less about the legal arguments and more about the legislative intent surrounding sports betting and financial markets. I think it’s possible to hold more than one thought in your head on this topic:
Yes, Congress intended to give broad oversight to the CFTC without having to worry about state intervention.
No, Congress did not intend for the CFTC to oversee what amounts to nationwide sports betting.
These things can both be true, as inconvenient as that might be for everyone on both sides of the fight over prediction markets. Sorry for shouting BUT THE LEGISLATIVE HISTORY IS CLEAR THAT NO ONE WANTED SPORTS BETTING OUT OF THIS. Republished from a post at The Event Horizon:
Here are some excerpts of the colloquy between Sen. Dianne Feinstein and (Sen. Blanche) Lincoln on the Dodd-Frank Act, which amended the Commodity Exchange Act that governs the CFTC:
Mrs. FEINSTEIN. … Will CFTC have the power to determine that a contract is a gaming contract if the predominant use of the contract is speculative as opposed to a hedging or economic use?
Mrs. LINCOLN. That is our intent. The Commission needs the power to, and should, prevent derivatives contracts that are contrary to the public interest because they exist predominantly to enable gambling through supposed ‘‘event contracts.’’ It would be quite easy to construct an ‘‘event contract’’ around sporting events such as the Super Bowl, the Kentucky Derby, and Masters Golf Tournament. These types of contracts would not serve any real commercial purpose. Rather, they would be used solely for gambling.
I mean, it doesn’t get clearer than that. This is made more hilarious by the fact that Lincoln is now lobbying for prediction markets, and is also entering an amicus brief on behalf of Kalshi. She literally said at one point that we shouldn’t have sports betting via event contracts! This isn’t in dispute! Maybe she has had a legitimate change of heart, but at the time, sports event contracts were not the intent.
Let’s take the CFTC and prediction markets out of it for a second, and do a thought experiment. What do you think the reaction would be if you asked members of Congress back in 2010 (or today, for that matter) the following question: “Would you vote for legislation legalizing sports betting in all 50 states?”
That, of course, would be terribly unpopular, and it would never pass Congress, if you forced a vote on it. If you want to argue about whether Kalshi is technically sports betting or not, go pound sand, this is my thought experiment. You can change my wording in all sorts of ways to benefit Kalshi, and I don’t think it would change the outcome.
But it amounts to this: If you told everyone back in 2010 that changes to the law would allow betting against others and market makers on sports outcomes via an exchange, I think changes would have been made back in 2010.
For example, show some 2010 members of Congress this (I got a push alert for it from Kalshi today), and ask them if this is what they intended:
And, of course, we have the data point that Congress specifically banned sports betting in 1992 via the Professional and Amateur Sports Protection Act (later over turned by the Supreme Court, of course). There has never been any momentum to legalize sports betting of any type at the Congressional level, whether it’s via sportsbooks, or an exchange or anything else.
If Congress really thought trading/betting on sports event outcomes would be included in the CEA, we would have seen infinity more care put into it, or we would have seen it more explicitly banned in the language of the act. But it wasn’t, and we’re left with today’s mess — or gold mine — depending on your point of view. Some people who matter seemed to think that gaming and sports betting wouldn’t be allowed, and that OF COURSE THE CFTC WILL STOP THAT. Until the CFTC, at the start of this year, decided it wouldn’t try to stop it.
It should also be pointed out that most people probably saw and heard that “gaming” would not be included… otherwise we would have had at least the professional sports leagues lobbying hard against it at the time.
In any event, laws are complicated. Congress could have wanted two things that are in conflict in the actual law: a CFTC unfettered by the states, and no sports betting via the CEA. That conflict is leading to the biggest expansion of legal sports betting in the history of the United States. The stakes are high.
At the end of the day, Kalshi may win the legal battle, and sports event contracts via prediction markets will survive and flourish. But let’s not mistake that reality for the fantasy that Congress intended to facilitate nationwide sports betting.
Ifrah Law has been at the center of advancing iGaming in the U.S., shaping groundbreaking legislation, leading precedent-setting cases, and guiding clients that span the iGaming ecosystem through every phase of their business journey. Learn more at IfrahLaw.com.
Gambling news roundup
Governor DeWine Calls on Casino Control Commission to Remove Prop Bets Following MLB Investigation, Previous Player Threats (Press release): “Ohio Governor Mike DeWine today called on the Ohio Casino Control Commission (OCCC) to remove prop bets from the list of legal bets that can be placed under Ohio's contractual rules for operators. The Governor’s request comes after Major League Baseball (MLB) announced it placed two Cleveland Guardians pitchers on leave related to a “sports betting investigation.” The Governor also previously expressed concerns about prop betting following threats to collegiate athletes at the University of Dayton.”
“Governor DeWine also announced that he will be asking the commissioners and players unions of the six major sports leagues in the United States–MLB, the National Football League, the National Basketball Association, the Women’s National Basketball Association, the National Hockey League, and Major League Soccer– to support this effort to ban prop betting to ensure the integrity of their leagues.”
“Governor DeWine noted a particular problem with micro prop bets–prop bets on highly specific events within games that are completely controlled by one player.”
“The evidence that prop betting is harming athletics in Ohio is reaching critical mass. First, there were threats on Ohio athletes, and now two high-profile Ohio professional athletes have been suspended by Major League Baseball as part of a ‘sports betting investigation,’” said Governor DeWine. “The harm to athletes and the integrity of the game is clear, and the benefits are not worth the harm. The prop betting experiment in this country has failed badly. I call on the Casino Control Commission to correct this problem and remove all prop bets from the Ohio marketplace.”
A widespread ban on prop bets — using a sledgehammer instead of a scalpel — is of course a terrible idea on multiple fronts. But this kind of effort will likely pick up steam, and not just in Ohio, given the current landscape.
Sports gambling scandals raise concerns over game integrity (Axios): “The major sports leagues are confronting a potentially costly reality in sports gambling: If you embrace it, problems will come.”
“Why it matters: Recent investigations of pro baseball and basketball stars have raised fears about the integrity of sports, and whether certain plays, or even whole games, are being manipulated.”
“Gambling industry consultant Dustin Gouker said the advent of regulated sportsbooks has made it easier for authorities to flag irregular activity that otherwise might've stayed in the shadows via illegal offshore betting apps.”
"Do we need to be able to bet on what the next pitch is, whether it's a ball or strike? Arguably, not," Gouker, of Closing Line Consulting, tells Axios. "But if you start banning lots of things that are in game and make the product worse, you're going to send that offshore."
"Bad actors are going to be bad actors," but " we have companies and sportsbooks working together to make sure that if something untoward is happening in the market, we find out," Gouker says.
AGA Research Reveals Consumers Know Sweepstakes Casinos Are Gambling (press release): “As gaming regulators, state Attorneys General, and state legislatures continue to scrutinize the business practices of online ‘sweepstakes’ casinos, new research shows that consumers overwhelmingly use these platforms to gamble – and that sweepstakes operators are heavily targeting players in key states. By exploiting loopholes in the law, these operations undermine the integrity of the legal, regulated gaming marketplace.”
“According to Sensor Tower data compiled by the American Gaming Association (AGA), half of all online, real-money casino advertisements seen by consumers in early 2025 promoted offshore ‘sweepstakes’ casinos. The data shows these unregulated operators concentrate their advertising in populous states.”
“These operators present themselves like legal, regulated platforms – but they operate outside the law and regulation,” said AGA Vice President of Government Relations, Tres York. “There are few if any responsible gaming tools, no regulatory oversight, and no consumer protections. It’s a dangerous subterfuge that puts players at real risk.”
Full survey from the AGA. And the report on advertising trends.
I don’t doubt that the sweepstakes operators could come up with a similar survey that would say almost no one considers it gambling. But the truth on sweepstakes, from where I sit is: 1. some people definitely use sweepstakes sites as a proxy for real-money gambling, 2. some people are legitimately using it mostly for the free-play, sometimes with a chance to win real money. 3. there’s a good legal argument for it in a lot of jurisdictions, at least until someone tells them to stop.
I am sure I (and others) will dig more into this data at some point. The digital ad spend is really interesting on its own. Anecdotally, all I get on Facebook and Instagram is one sweeps ad after another.
MyPrize Achieves Over $1.2B GMV Run Rate and Successfully Closes Funding Round At $250M Valuation Cap, Disrupting Online Social Gaming As The Fastest Growing Gaming Business In The United States (press release): “MyPrize, the team behind the world's fastest growing multiplayer online social casino that is operating at a GMV run rate of over $1.2 billion, today announced the closing of its $21 million strategic funding round at a valuation cap of $250 million from existing investors and major family offices. The round includes participation from prior lead investors Dragonfly and Boxcars Ventures. With this round, the company has now raised a total of $38 million in funding to date. MyPrize has seen unprecedented growth and success in the US-based online social gaming sector. Founded by Zach Bruch in late 2023, and launched in summer 2024, the company is on track to achieve a set of monumental milestones for a technology company, surpassing $100M+ in annual revenue while simultaneously reaching profitability by the end of the year. This feat is nearly unprecedented for a company in its first two years after founding and just one year following product launch.”
"MyPrize has transformed online entertainment for both players and creators, and the momentum we're seeing is just the beginning," says MyPrize Founder & CEO, Zach Bruch, commenting on today's news, "The growth we are seeing at MyPrize proves that social gaming has fully arrived to the US market and there is massive demand for a more engaging, creator-driven approach to online gaming. The nature of entertainment has fundamentally changed with speculation taking center stage. As users embrace this new frontier, MyPrize is ushering in the golden age of online entertainment, powered by our proprietary AI retention and engagement platform and best-in-class player and creator experience. Our latest fundraise will unlock the next phase of our exponential growth curve and open the MyPrize platform to thousands of new creators, celebrities, and all-new markets globally."
In case it’s not clear, this is a sweepstakes casino.
Taxes, but not jobs, pouring in from sports betting (WWLP): The legalization of sports betting was “slightly positive” but “largely a wash” for the Massachusetts economy in its first year, a researcher from the UMass Donahue Institute told gambling regulators Thursday as he also flagged signs that its growth is eating into the state’s casino tax revenue.
“The primary economic benefit from sports betting in 2023 was the tax revenue it generated for state government — $90.8 million in the first year of legal wagering here. But other than that, Donahue Institute Research Manager Thomas Peake told the Gaming Commission on Thursday, the launch of the largely-mobile industry created ‘very, very, very few’ new Massachusetts jobs (a net addition of 118 jobs from legal sports betting compared to a net addition of 15,431 jobs from the introduction of casinos) and comparatively scant in-state spending.”
“This early research on sports wagering shows that, in every respect, the positive impacts to the Commonwealth generated by this new industry are dwarfed by the positive impacts generated by other forms of gambling in the state. Casino gambling remains by far the larger driver of economic activity in Massachusetts,” the Gaming Commission said in its summary of Peake’s research, which focused on 2023. “While the amount of money wagered, won, and lost in sports betting is significant, the legalization of sports betting has not led to significant new levels of employment in the Commonwealth, and mobile operators spent about 4% of payments overall on Massachusetts businesses in contrast to 45.8% of payments by casinos.”
White House Says It Backs Quintenz For CFTC Chair, Despite Delays (The Event Horizon): “Politico and Bloomberg reported today that the White House is still firmly behind Brian Quintenz to lead the Commodity Futures Trading Commission. That news comes after a Senate committee twice delayed a vote to move his nomination to the Senate floor. The White House reportedly asked for the most recent delay.“
MGCB Issues Cease-and-Desist Orders to Six Illegal Gambling Sites Targeting Michigan Players (press release): “The Michigan Gaming Control Board (MGCB) has issued cease-and-desist letters to six unlicensed online gambling platforms attempting to target Michigan residents without state authorization. The action underscores the MGCB’s relentless, ongoing efforts to shut down illegal gambling operations and protect Michigan consumers from financial risk, identity theft, and unfair play.”
“The targeted sites — Crypto Slots, NitroBetting, NewVegas, Las Vegas USA Casino, Grand Rush Casino, and Slotgard Casino — were found to be operating in violation of Michigan laws that require licensure for internet gaming and sports betting.”
DraftKings Win In New York Could Help Cases Elsewhere (Legal Sports Report): “A ruling in New York could provide DraftKings and its defense a significant boost to similar lawsuits filed against it across the country. DraftKings was granted its motion to dismiss a complaint that alleged that the company’s promotional terms regarding a “deposit bonus” rewarded to new customers were deceptive.”
Casino CEOs met with Congress to talk federal gambling tax deduction cut (SBC Americas): “MGM Resorts International CEO Bill Hornbuckle says that he and other land-based casino company chief executives met with politicians in a bid to get the One Big Beautiful Bill Act’s (OBBBA) change to how much gamblers can deduct on their taxes ‘corrected.’ On MGM’s Q2 earnings call on Wednesday, Hornbuckle was asked for his thoughts on the OBBBA provision, which stipulates that taxpayers will soon only be able to deduct 90% of their documented gambling losses that do not exceed their winnings.”
BetRivers Sets New Illinois Minimum Bet Amount in Response to Bet Fees (Sports Betting Dime): “BetRivers has made a move in Illinois to address the state’s per bet fee policy approved in its annual budget. Rush Street Interactive Chief Financial Officer Kyle Sauers said during the company’s Q2 earning report on Wednesday that BetRivers has instituted a $1 minimum bet amount for users in Illinois moving forward. BetRivers is the sixth licensed sportsbook in Illinois to directly address the new per bet fees.”
Want to sponsor The Closing Line?
You can email dustin@closinglineconsulting.com for more information.
FanDuel’s Trusted Voices: Conversations About Betting is designed to equip adults, including parents and coaches, with tools and resources to talk to young people about gambling, including information on warning signs, risks and proxy betting. The program is led by retired professional basketball player Randy Livingston and his wife, basketball agent Anita Smith, who share their personal stories related to problem gambling, with the hope of preventing others from experiencing similar harms. Learn more and join the conversation here.
