Gambling Insider Relaunches as Prediction Markets Shake Up Industry

As we flip the calendar to a new year, prediction markets are dominating the conversation in industry circles. The financial trading platforms – thinly-veiled sports betting apps, to many – are impacting virtually every aspect of the business.

While companies like Kalshi and Polymarket, with the blessing of the Commodity Futures Trading Commission, boldly encroach upon the sports betting space once owned by state-regulated operators, battles play out in courtrooms across the country, and debate rages over what some perceive as the carelessness with which these prediction markets do business.

Our coverage of prediction markets will be representative of how we’ll cover the industry as a whole. We’ll report and write about legislation and legal matters, the intersection of gambling with finance and crypto, people and culture, and responsible gaming. We’ll do investigative journalism, business analysis, and deep dives into data. 

This industry is an impossible one to predict, but sure is fun to follow. Please join us by bookmarking this website and making the new iteration of Gambling Insider a destination for your gambling news.

Let’s start here, with an overview of how prediction markets are disrupting the industry:

Prediction Markets’ Foray Into Sports Rankling States

Prediction markets are not new. It’s their recent move into sports that’s causing angst.

The event contracts that prediction markets offer are designed, theoretically at least, as hedges against certain economic conditions. Event contracts tied to interest rates, the price of Bitcoin, or which AI company will have the top ranked LLM at the end of the year can certainly be used as legitimate financial instruments. That’s a harder case to make when it comes to whether over 48.5 points will be scored in the Rose Bowl.

Sports-event contracts comprise around 90% of the trading volume on Kalshi, and the US beta version of Polymarket offers only sports, with the promise of crypto, tech, politics and more to come soon.

Prediction markets’ heavy lean into sports isn’t sitting well with states, many of which have taken legal action and are threatening licensed sports betting operators with serious regulatory sanctions should they cross the line into the emerging but gray area.

But with massive investments valuing Polymarket and Kalshi in the tens of billions, and financial behemoths like Robinhood and Crypto.com getting into prediction markets in big ways, bullishness abounds that federal preemption will win out, and that these companies will be able to keep doing what they’re doing wherever they feel like doing it.

Read more: Why the Gambling Industry Needs Better News Discipline — and How We Will Cover It

Sportsbooks, DFS Operators Enter Prediction Market Space

FanDuel, DraftKings, PrizePicks and plenty of others aren’t sitting idly by while the Kalshi, Polymarket, Robinhood, etc. eat into their market share in regulated states and offer sports bets in states where it’s not even legal. Major sportsbook and DFS operators are moving forward with their own prediction market plans, despite regulatory threats.

It’s amounting to a game of chicken between operators and states. Are the sportsbooks really willing to risk their licensees as they jump into prediction markets? Would states really strip the licenses from their top revenue producers?

Prediction markets also raise questions about efforts to legalize sports betting in more states. Expansion seems to have plateaued, with legalization in California and Texas still a long way off. Meanwhile, FanDuel and DraftKings have pulled out of the American Gaming Association, and these operators believe there may be better ways to invest their money than in more futile lobbying efforts.

Will New Gambling Tax Rule Push Bettors To Prediction Markets?

A provision tucked into the One Big Beautiful Bill Act, signed into law by President Trump on July 4, caps at 90% the losses gamblers can claim to offset winnings. Some industry observers believe the change will have a massively adverse effect on regulated sportsbooks, as it will force their biggest customers toward prediction markets.

For players, the impact of the new tax rule could be enormous. Not only does it make gambling as a career untenable, it means that even recreational gamblers may have to pay taxes on phantom income – break even gambling, and still owe the government money. 

“Eighty percent of the handle in the [regulated sports betting] market is generated by professional syndicate play and whale VIP play,” American Bettors’ Voice board member Adam Robinson told me over at DeFi Rate last month. “I believe this tax loss provision is going to incentivize those who are responsible for 80% of regulated handle to look elsewhere.”

While it’s uncertain how the IRS will treat sports event contacts, “elsewhere” means prediction markets for many gamblers, a notion of which FanDuel and DraftKings are well aware.

Impetus for iGaming Legalization?

As fast and as big as sports betting has grown in the US since PASPA was overturned seven years ago, it’s a fraction of iGaming’s potential. While there’s plenty of trepidation about the continued expansion of gambling, the industry covets the massive profits online casinos would unlock.

It seems to be just a matter of time until casino-style games pop up on prediction markets. It’s foolhardy to believe otherwise, many industry observers insist.

Such a development could motivate states to advance iGaming legislation. If online casino gambling shows up on tacitly federally-endorsed platforms, states may decide they’d better get ahead of it—so they can regulate and tax it themselves.

Irresponsible Gaming?

To responsible gaming advocates, prediction markets are serial violators.

Among the violations: 1) selling gambling as investing and a means to build wealth; 2) circumventing standard consumer-protection regulations imposed by states such as KYC and self-exclusion tools; 3) offering insider trading and manipulable markets, 4) partnering with questionable influencers, such as fake media accounts and those with anti-Semitic leanings.

These are major reasons for the pushback against prediction markets. But for now, Kalshi, Polymarket and the like are undeterred.

We’re sure the gambling environment, largely shaped by prediction markets, will change in 2026, we’re just not sure how. It will be thrilling to follow the evolution (devolution?), and we’re glad you’re along for the ride.