Sports Betting Hall of Famer Sue Schneider is back with more monthly insights. This time, she shares thoughts on how the Wire Act matters to the prediction markets discussion.
The talk at every conference I’ve attended in the last one and a half years has been dominated by the prediction markets debate. It’s clearly a controversial topic, especially in the US, where lines in the sand have been drawn by state legislators and gaming regulators as well as tribes.
The court cases are flying at a rapid pace and the decisions vary from day to day as to which side of that argument is favored. This leads to the conventional wisdom that this will ultimately end up going to the Supreme Court for a final decision.
I’ll forego a rehash of the pros and cons of the issue and go straight to a part of the equation that I’ve seldom heard brought up in the hours and hours of discussion at every event: the Wire Act.
How Wire Act fits into prediction markets debate
For the uninitiated. the Interstate Wire Act of 1961 (18 U.S.C. § 1084) is a U.S. federal law originally enacted to help combat organized crime by restricting the use of interstate wire communications for certain gambling activities, primarily sports betting.
This legislation was initiated as part of Attorney General Bobby Kennedy’s War on Crime. It was originally intended to cut into organized crime and what was seen as one of their big revenue items: telephone sports betting. As I’ve often described it, before the internet was even a gleam in anyone’s eye, this was meant to prohibit, for example, a New York telephone bookie from taking a bet from a customer in, say, New Jersey.
The Interstate Wire Act, the Travel Act and a few other federal laws were the key pieces of legislation that enforcement pointed to as to why internet sports wagering was illegal. The legislative history shows that the following activities were continually referenced as the Wire Act passed:
- Bookmaking
- Horse racing
- Interstate telephone betting
How horses galloped away
And, actually, the Interstate Horseracing Act of 1978 (IHA or 15 U.S.C. §§ 3001–3007) was subsequently passed as a federal law that regulates the interstate transmission of wagers on horse racesm thus exempting them from enforcement of the Interstate Wire Act. This allowed telephone or online wagering on horses which was known as Advanced Deposit Wagering or ADW. These were the pertinent law enforcement tools targeting internet sports betting until the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006.
Products that need liquidity are the ones most affected by the Interstate Wire Act. Poker advocates were happy when, in 2011, the DOJ Office of Legal Counsel Opinion concluded that the Wire Act applies only to bets on sporting events or contests, not to poker, casino games, or lotteries. However, in 2018, that opinion was overturned.
Then, in 2021, in New Hampshire Lottery Commission v. Rosen, the U.S. Court of Appeals for the First Circuit rejected the 2018 DOJ interpretation and held that the Wire Act’s prohibitions are limited to sports gambling. (It was brought by the state lotteries to clarify whether they could, indeed, offer the Multi-State Lottery Association’s Powerball and MegaMillions products.)
That decision is currently the leading federal appellate authority and the DOJ has since indicated it will follow that interpretation. What some poker operators have done to broaden their liquidity pools is to request interstate compacts among the states that they’re licensed in to allow for a pooling of players, thus improving shared liquidity.
In fact, there is a process now in place to enhance this method. The principal interstate poker compact in the United States is the Multi-State Internet Gaming Agreement (MSIGA). MSIGA members (2026) include the states of:
- Delaware
- Nevada
- New Jersey
- Michigan
- Pennsylvania
- West Virginia
The Interstate Wire Act certainly contributed to the gaming regulatory system that we’re familiar with in the U.S. today. The state licensing requirements, including services like geolocation, are all part of the status quo.
It’s also the reason that legacy products that took hold in other parts of the globe never took off here. I’d point to betting exchanges like Betfair, Betdaq and Matchbook as examples of companies whose betting exchange products were not able to operate in the US due to the Wire Act. There was just no mechanism to allow for betting exchanges to exist under the state gaming regulatory systems.
I first heard of the Commodity Futures Trade Commission (CFTC) back in 2022 when PredictIt filed suit. The company had operated since 2014 with political markets under a “no action” letter from the CFTC.
When the CFTC moved to restrict their activities, it precipitated a suit by PredictIt, which was finally settled in July 2025 allowing PredictIt to continue to operate. Kalshi began operating in July 2021 and Polymarket, which began as a crypto market, settled a lawsuit with CFTC for operating without a license in July 2022. It acquired QCX (and its license) in July 2025.
It’s been clear from its beginning that the American Gaming Association (AGA) would be fighting authorization of licenses by this federal agency when it dipped its offerings into sports. In fact, the genesis of the AGA in the mid-90s was predicated on keeping the federal government out of gaming regulation and taxation.
This concern was exacerbated when, in 1996, Congress passed the Gambling Impact Study Commission. But there appears to be no appetite in that group nor any of the 2-pkus+ industry trade groups that exist today to amend or repeal the Wire Act.
It certainly wouldn’t be the only fix for the dilemma the industry finds itself in right now. But it is a piece that should be discussed and debated as to its role in how we got here and finding some resolution to the dilemma.
