After the Commodity Futures Trading Commission (CFTC) outlined its ideas for the future of prediction markets last week, it’s been another busy few days.
Dozens of state attorneys general, tribal organizations, and even an ex-CFTC chairman filed various amicus briefs in pre-existing court cases. Various gaming and tribal lobbies, labor unions, and chambers of commerce wrote to U.S. senators asking for pending crypto legislation to add language that “explicitly prohibits event contracts tied to sports and casino-style gaming.” And there was a legal to-and-fro in Kentucky; days after being sued by a prediction markets coalition, Kentucky‘s attorney general sued Kalshi and Polymarket.
Throw in the fact that Polymarket was denied a preliminary injunction in Michigan, and it’s been non-stop. And that’s just the tip of the iceberg.
Each Friday in ‘Prediction Markets Weekly’, SBC Americas breaks down some of the stories you may have missed.
Gov. Pritzker signs off on Illinois prediction markets tax
Illinois loves to tax (just ask regulated sportsbooks), and it is on the verge of becoming the first state to implement a tax on sports event contracts, after Gov. J.B. Pritzker signed the state’s 2027 budget into law.
The budget includes a new tiered tax rate for “exchange wagers” that will go into effect on Wednesday, July 1. Prediction market platforms will be required to pay 1.75% on each exchange wager, rising to 3.5% after the first five million such trades during a fiscal year. The resultant tax revenues will go into Illinois’ sports wagering fund.
Illinois will be the first, but it may not be the last. The prediction markets coalition’s lawsuit against Kentucky centers on approved legislation to tax event contracts, and some kind of state regulatory legislation for prediction markets is also on the docket in other states including:
Kalshi is headed north of the border
Prediction markets have been the biggest thing in gaming (oops, we mean “not gaming”) in the U.S. for 12 months but they have not permeated Canada in the same way. That may be about to change, at least to some extent.
Kalshi announced this week that a new partnership with Toronto-based financial company Wealthsimple will make around 4,000 of its event contracts available to Canadians for the first time on a new standalone Wealthsimple Predict app.
“Prediction markets are the fastest-growing segment of global financial markets … Until now, Canadians have had limited access,” said Wealthsimple co-founder Brett Huneycutt. “Wealthsimple Predict gives Canadians a clean, well-designed way to access these markets, with education and guardrails built in from day one.”
But Canada’s strict regulatory stance on binary yes/no options means the offering will be limited to economic, financial, and environmental categories only, and all contracts must have a settlement period of 30 days or longer. Canadian Gaming Business broke it all down in more detail.
Kalshi co-founder Mansour talks taxis and Ubers
Sticking with Kalshi for a moment, co-founder Tarek Mansour spoke to Front Office Sports in a new Q&A published on Friday, wherein he touched on several topics, including what he termed “industry infighting” at the convergence of gaming and trading.
“That’s fundamentally coming from business interests and people who want to curb competition,” he told FOS‘ Ben Horney. “It’s like when the taxis came out against Uber. Yes, there are some casinos that are unhappy about the added competition because in prediction markets it’s a 1% margin, whereas with those traditional sports betting models it’s 15% to 20% margin. They’re betting against their consumers and they ban winners. They make more from the losers.
“Prediction markets are a fundamental disruption to that business model that makes for a better product. If your competition is criticizing you, that may be a good signal, actually.”
Mansour also claimed that Kalshi feels good about the state of play in the legal wrangling over whether prediction markets, stressed that Kalshi advisor and Polymarket investor Donald Trump Jr. “is not involved in regulatory in any way, shape, or form,” and gave his thoughts on the CFTC’s rulemaking process.
ProphetX goes live nationwide
ProphetX’s fast ramp-up to entering the prediction markets space is complete, as it officially launched across the U.S. this week just days after receiving CFTC approval.
The company only applied to the federal regulator to be registered as a designated contract market (DCM) in January and has enjoyed an unusually rapid journey. It self-certified its first contracts on Monday. Along with Novig’s recent approval, the launch continues to crowd the market even further.
It also completes the latest operational pivot for ProphetX, which spent years as the Prophet Exchange sports betting exchange before rebranding under the sweepstakes model last year, only to quickly abandon that vertical for the latest hot product.
CME Group sues CFTC
It all feels a long, long time ago that the announcement of the partnership between FanDuel and the Chicago Mercantile Exchange (CME Group) last summer heralded the sports betting industry’s first big step into prediction markets. Things have changed a lot since then.
This week, CME Group (whose CEO Terrance Duffy recently announced he will step down next year) has sued the CFTC and Chairman Michael Selig. The crux of the legal argument is that perpetual futures products such as those offered by Kalshi should not have been granted “futures” status and instead should be categorized as “swaps”.
The complaint claims that this causes “textbook competitive injury” to CME. “With one stroke of his pen, the chairman overrode Congress’s definition of the term ‘swap’ and circumvented the regulatory regime Congress required for that form of derivative,” added CME Group’s filing.
It’s only tangentially related to sports event contracts, if at all. But what it does demonstrate is more fractures in the industry; CME Group is a longstanding stalwart of the derivatives industry. But there are new kids in town now.
