US Gambling Giants Call Prediction Markets the “Largest Unauthorized Expansion of Gambling”
A group of major traditional gambling organizations in the US have gotten in direct contact with the Senate to argue that prediction markets, in particular crypto-based platforms, have led to the “largest unauthorized expansion of gambling” in the history of the US. On June 16, legacy operators sent a letter to the US Senate to ask for an explicit ban to be included into the upcoming Digital Asset Market Clarity Act, commonly referred to as the CLARITY Act.
The signatories argue that the Commodity Futures Trading Commission (CFTC) should not have any authority over sports-related betting activities taking place online. The CFTC had recently proposed a new framework for formally regulating sports prediction markets rather than directly banning them. The joint call from traditional gambling organizations in the US comes at a time when Web3 event contracting trading has reached unprecedented levels: major platforms Kalshi and Polymarket have over $23 billion in combined monthly trading volume.
Federal Oversight vs. State Gambling Authority
The essence of the discussion lies in the dispute on whether sports contracts traded on public blockchain platforms should be viewed as financial derivatives that are federally regulated, or as standard sports betting activities. In the US, the traditional gaming structure thrives on local control, where state regulators and tribal governments hold monopolies, and generate billions in local tax revenues and jobs. Their role is to enforce strict consumer safety laws and responsible gaming mandates.
Prediction platforms like Polymarket and Kalshi, on the other hand, are argued to bypass this local infrastructure by positioning sports outcomes as binary asset contracts, therefore operating under federal financial rules overseen by the CFTC. The main argument of the traditional gaming lobby is that this approach creates an uneven situation where online sports betting is offered as an “investment product,” allowing operators involved in crypto gambling markets to avoid licensing fees and local taxation.
The letter sent to the Senate states that “the CFTC was created to oversee commodities and derivatives markets, not gambling and not sports wagering. It lacks both the expertise and the infrastructure to police nationwide sports betting, particularly when robust state and tribal regulatory systems already exist.”
Potential Outcomes of the Regulatory Battle
The joint initiative of the legacy gaming industry indicates that prediction markets have moved beyond being a niche crypto trend into an important competitor for traditional finance and entertainment monopolies. While giant industry players are attempting to include a ban on sports contracts powered by public blockchains into the upcoming CLARITY Act, another coalition of over 200 companies and organizations have recently urged the US Senate to place the legislation on its agenda without delay, which highlights the growing support for the bill.
For the broader digital asset ecosystem, the outcome of the legislative discussions will be important in terms of defining the boundaries of decentralized finance in the US.
For the digital asset ecosystem, the outcome of this legislative battle will dictate the boundaries of decentralized finance in the United States. TradeBlock experts have broken down possible scenarios and outcomes in the matrix below.
| Scenario | Outcome | Public Implications | Market Data |
|---|---|---|---|
| Legacy gaming organizations prevail | Prediction markets are banned in the upcoming CLARITY Act |
|
Major disruption a massive market that generated over $23 billion in trading volume last month alone |
| CFTC maintains oversight | Federal regulators take full control over sports contracts |
|
Regulated U.S. platforms like Kalshi are already thriving, with $16.81 billion in volume in May alone |
