Ohio is the latest state to attempt legislation that would attempt to establish a licensing and regulation framework for prediction market platforms, including requiring them to pay tax.
Sen. Bill DeMora filed Senate Bill 430 on Monday, which would amend state code to specify that using a prediction market to trade event contracts on sports constitutes sports wagering and is therefore subject to regulation in the Buckeye State.
DeMora introduced the bill amid a backdrop of Ohio’s ongoing litigation battle with Kalshi over whether trading and betting on sports are the same.
Sports trading = sports gaming?
“‘Sports gaming’ includes the use of a prediction market to acquire, sell, or trade an event contract that is contingent on the outcome of a sporting event,” reads a new line that SB 430 proposes adding to state law.
In essence, the legislation would treat prediction market sports event contracts the same as it treats the sports wagers offered and placed on licensed sportsbooks in the state.
Prediction market platforms would have to secure approval from the Ohio Casino Control Commission (OCCC) before accepting customers in the state, and would be regulated and taxed like sports betting.
Ohio Casino Control Commission wants to fine Kalshi $5M
Prediction market platforms such as Kalshi currently offer a range of sports contracts across the U.S. The company, its competitors in the space, and the Commodity Futures Trading Commission (CFTC) are arguing in various court cases that it has the right to do so under federal law, above the level of state gaming laws.
Ohio is one of many states embroiled in litigation over the issue:
- Kalshi sued state officials last year after receiving a cease-and-desist order from the OCCC.
- In March, a federal court in Ohio denied Kalshi a preliminary injunction against the OCCC and Ohio Attorney General Dave Yost, because Judge Sarah Morrison determined that Kalshi’s sports contracts are not swaps under the Commodity Exchange Act, that the company failed to prove it was likely to succeed on the merits of the case and had no right to a preliminary injunction.
- A few weeks later, in mid-April, the OCCC announced that it intends to fine Kalshi $5m in light of the fact that the company has continued to offer sports contracts that the regulator says are tantamount to illegal sports gaming without a license.
Iowa advances its prediction markets licensing bill
Ohio is not the only state with designs on licensing, regulating, and taxing prediction markets, nor is it the first to introduce legislation to do so.
On April 27, the same day that DeMora filed his bill, an Iowa House Ways and Means subcommittee recommended the passage of Senate File 2470, a bill that aims to introduce regulations and taxes on prediction market platforms that operate in the state.
SF 2470 would require companies that offer event contract trading to pay an initial $20m for a license from the state Department of Revenue. Its latest version would tax platforms like Kalshi at 20% of their adjusted revenue generated, and a Senate amendment added a separate 20% excise tax on the price of each event contract. The Iowa Legislative Services Agency estimated that the bill could reap approximately $40m in new tax revenue in fiscal year 2027.
The Iowa Senate became the first U.S. legislative chamber to pass a bill to regulate and tax online prediction market platforms at the state level in a 45-1 vote to pass SF 2470 at the end of March.
Various other states have bills in play that would outright ban or otherwise restrict prediction markets, but Ohio is looking to follow in Iowa’s footsteps. The state legislative pushes for regulation come as the question of whether federal law should supersede state gaming laws when it comes to event contracts trading continues to underpin federal and appeals court cases around the country.
