The Washington State Gambling Commission is the latest regulator to take a hard stance against the operation of prediction markets.
The commission posted a notice stating that it considers online operators that offer event-based contracts to be facilitating “unauthorized activity” in Washington State.
The letter is a public alert and not specifically addressed at licensees or event contract operators.
The only form of sports betting available in Washington has to take place on tribal lands. Online apps are available for use at tribal casino properties, but are not available throughout the state. Many operators, including FanDuel and DraftKings, have partnerships in the state.
Fanatics plans to offer event contracts in Washington
One operator who doesn’t have a partnership in the state is Fanatics. However, the operator does have a prediction market app live in the state.
Fanatics Markets debuted in 10 states last week and rapidly expanded its offering into 24 states, none of which are states in which Fanatics offers licensed sports betting. Fanatics was able to launch the new venture via a partnership with Crypto.com and the acquisition of Paragon Global Markets, an introducing broker that can host event contracts from a designated contract market (DCM) such as Crypto.com or Kalshi.
Though Fanatics is not live in Washington, the opinion of the Washington Gaming Commission could impact its operations in other states. Arizona, Illinois and Nevada regulators have all communicated to licensees that offering sports contracts in a state where regulators deem it illegal or even working with a partner who offers contracts in those states could potentially impact the operator’s standing in those states. Fanatics does not have any licenses in Nevada but holds sports betting operator licenses in both Illinois and Arizona.
To reiterate, this letter is just a cautionary memo to the public and not enforcement action or a cease and desist.
SBC Americas reached out to Fanatics for comment but has yet to receive a response at time of publication.
Talk but no action yet in Washington
The commission deems event contracts to be an illicit activity, but the regulator hasn’t taken any regulatory or legal action against prediction markets doing business in the state.
“While prediction markets are an unauthorized activity in Washington State, we acknowledge that the future of prediction markets, including those for sports, political events, etc., remains a subject of ongoing litigation both federally and in other states,” said the commission. “We will continue to monitor the ongoing cases as they progress through the court system and will provide updates once the courts provide further guidance.”
Washington’s gambling regulator has experience in dealing with prediction market platforms, having sent a cease and desist order to Polymarket in 2021. At the time, the prediction market platform was not supposed to be accepting U.S. customers. Polymarket’s actions led to a $1.4 million civil penalty levied by the Commodity Futures Trading Commission (CFTC) for the company’s failure to register as a swap executive facility.
Polymarket exited the U.S. market in 2022 before making its reentry earlier this month.
