In the wake of recent high-profile scandals, the U.S. sports betting industry faces an unprecedented integrity crisis.
From federal player indictments to aggressive crackdowns on micro-betting and college prop bets, regulators and politicians are rapidly rewriting the rulebook to protect competition.
Speaking ahead of SBC Summit in Lisbon, Bill Pascrell III, Partner at Princeton Public Affairs Group, shines a light on sports betting integrity in the US as he explores the shifting sports betting landscape and the challenges that prediction markets may pose for traditional sportsbooks.
Integrity is a top concern for everyone involved in the sports betting industry. In the aftermath of recent scandals, have you noticed any change in the US market’s perception of sporting integrity?
Recent federal indictments against players like Terry Rozier and Emmanuel Clase have triggered a sharp decline in public trust.
The shift in perception is forcing leagues and regulators to aggressively restrict micro-betting to prevent individual play manipulation and is drawing heavy congressional scrutiny.
Key changes in the U.S. sports betting and integrity landscape include:
- Stricter limits on micro-bets: Major League Baseball partnered with sportsbooks to cap pitch-by-pitch bets at $200 and ban them from parlays.
- Congressional oversight: The Senate Committee on Commerce, Science, and Transportation demanded detailed documentation on league gambling policies and internal probes of the NBA’s integrity threatened by illegal gambling.
- Targeting individual stats: Scrutiny has fallen heavily on “prop bets,” which the NCAA is petitioning to eliminate entirely since they are easily manipulated by single players.
How would you describe the current sentiment among US politicians and regulators toward prop betting?
Sentiment among U.S. politicians and regulators toward prop betting is increasingly critical and restrictive.
Lawmakers and agencies across all levels of government view these wagers as significant threats to the integrity of competitions, prime targets for insider trading, and dangerous for consumer welfare.
Specific regulatory and legislative actions highlight this shifting sentiment:
- Collegiate athletics crackdown: Driven by lobbying from the NCAA, state gaming commissions in jurisdictions including Ohio, Maryland, Vermont, and Louisiana have completely banned prop bets on individual college athletes. Several other states are actively reviewing similar prohibitions.
- Congressional action on prediction markets: Federal lawmakers are increasingly scrutinizing “prop” and prediction bets on real-world events. Legislation like the bipartisan Prediction Markets Are Gambling Act and the BETS OFF Act targets wagers on election outcomes, government actions, and geopolitical conflicts to prevent insider trading and manipulation.
- Political trading bans: Both chambers of Congress have moved to restrict their own members and staff from participating in political prediction markets. The Senate outright banned such speculative wagers by its members, while the House has advanced comparable bipartisan proposals.
What is the best approach toward regulating prop and in-play markets that some see as susceptible to manipulation by players and coaches?
The best approach to regulating in-play markets and prop bets combines targeted market restrictions (such as banning micro-betting), strict wager limits, aggressive integrity monitoring, and a synchronized release of player information to prevent information asymmetry.
1. Market restrictions and product bans
Regulators and major sports leagues are shifting from broad legality toward targeted bans on bets that are easily controlled by a single individual (spot-fixing):
- Micro-betting / play-by-play markets: Banning granular, single-play wagers (e.g., the outcome of a specific pitch or an individual throw). These markets are highly susceptible to manipulation and have been a major focus of federal intervention.
- College prop bets: Restricting or outright prohibiting prop bets on individual college athletes. Several states have already implemented these bans following active advocacy by the NCAA.
2. Market and wager limits
Because completely eliminating all props is not universally adopted by all jurisdictions, operators are using safeguards to minimize financial incentives:
- Lower wager caps: Capping the maximum amount a bettor can wager on highly vulnerable markets. For example, after spot-fixing concerns arose, MLB and sportsbooks agreed to cap single-pitch wagers at $200 and exclude them from parlays.
- Exclusion from parlays: Removing easily manipulable props from multi-leg parlays, which reduces the potential for massive, high-risk payouts.
3. Data transparency and information control
A major vulnerability in in-play and prop markets is the time lag between an insider (like a player or coach) knowing an outcome – such as injury or line-up changes – and the information becoming public knowledge:
- Standardized Injury Reporting: Leagues (like the NBA) mandate more frequent and transparent game-day injury reporting to shrink the window where insiders hold a competitive betting advantage before markets lock.
- Data Partnerships: Sportsbooks partner directly with leagues, such as the NCAA’s integrity monitoring agreement with Genius Sports, to identify unusual odds shifts or suspicious account activities in real-time.
4. Federal enforcement and oversight
For unregulated, offshore, or prediction market operators, the oversight approach differs:
- CFTC regulation: The Commodity Futures Trading Commission (CFTC) has proposed rules to restrict event contracts tied to sporting events, categorizing them as spot-fixing magnets and contrary to the public interest.
- Federal Trade Commission: Proposed legislation, such as the PROTECT Student Athletes Act, seeks to utilize the CFTC to curb manipulation and restrict offshore entities that facilitate predatory micro-betting.
With many approaches in play in different states, what will the structure of future state-level sports betting market expansion look like in the US?
Future state-level sports betting expansion in the U.S. will rely heavily on a highly fragmented, state-by-state model that balances lucrative tax revenues with stringent regulatory frameworks.
Rather than a single uniform national rollout, expansion will take shape through three distinct structures:
Key structures of future expansion
- Consolidation and optimization: With legal sports betting active in 39 states, the initial “land grab” phase is over. Growth will come from increased operational efficiency, higher holds driven by same-game parlays, and in-play wagering.
- Alternative platforms (prediction markets): Platforms operating as “financial derivatives” through federal agencies (like the CFTC) are emerging in states without traditional sports betting. However, states are pushing back with excise taxes and legal injunctions to protect their jurisdictional and tax control.
- The Tribal and monopoly model: In the few remaining untapped mega-states (such as California and Texas), expansion is highly complex. Legalization will likely occur through compacts giving exclusivity to tribal interests or lottery-style state-run models.
State-specific regulatory approaches
- Tax rates and revenue sharing: States are increasingly raising tax rates, with some states (like New York) heavily taxing operator revenues. Meanwhile, other states (such as Wisconsin) utilize revenue-sharing compacts.
- Consumer protection: New mandates on deposit limits, mandatory time-out sessions, and responsible gambling messaging are being uniquely tailored by local gaming commissions.
- Product limits: States maintain different laws regarding what sports, bet types (e.g., college props vs. pro-only), and platforms are allowed
How can online sports betting operators facing much different regulatory concerns than prediction markets compete in the rapidly evolving US market?
Online sportsbooks maintain their competitive edge against prediction markets by emphasizing user convenience, expansive sports-specific parlay liquidity, and brand loyalty, while lobbying state regulators to enforce compliance parity and taxation.
These licensed operators directly counter the financial instrument models of platforms like Kalshi by leveraging several key strategic advantages.
Bill Pascrell III, Partner at Princeton Public Affairs Group, will be speaking at SBC Summit in Lisbon, on the panel entitled ‘World Cup vs Sportsbook Regulation’. The session takes place on Tuesday, Sept. 29, from 16:10-16:50PM CET on the Regulation & Compliance Stage. Register for your tickets here.
