Tribal and commercial gaming could lose anywhere from $7.3bn to $39.4bn in gaming revenue each year if prediction markets continue operating nationwide under federal oversight, according to a report from KlasRobinson Q.E.D. set for release soon.
KlasRobinson economists James Klas and Matt Robinson previewed their findings during an Indian Gaming Association (IGA) webinar Wednesday. The firm prepared the report for the IGA, and IGA Executive Director Jason Giles said it could be released next week.
The study models four scenarios in which the Commodity Futures Trading Commission (CFTC) continues to allow prediction markets to offer sports event contracts in all 50 states. Multiple parties are asking the U.S. Supreme Court to weigh in, as Circuit Courts have split on the issue.
Each scenario expands what those platforms offer and who offers it. During the webinar, Klas and Robinson walked through three of the four.
Klas and Robinson project $1.5bn in annual tribal gaming revenue under their mildest scenario, about 3% of the record $46.2bn Indian gaming generated in 2025. Under the worst case, tribes would lose $7.8bn, about one-sixth of that total.
Scenario 1: prediction markets offer sports contracts without limits
The first scenario assumes prediction markets keep offering sports event contracts in all 50 states with no further restrictions. KlasRobinson estimates tribal gaming would lose $1.5bn in gaming revenue a year, and commercial casinos and online operators would lose another $5.8bn, for $7.3bn total. The estimate includes about 38,000 lost direct jobs across tribal and commercial gaming and $546m in lost non-gaming revenue.
Because many tribes share gaming revenue with states under their compacts, those payments would also shrink.
Klas said the estimate assumes tribes keep making revenue-share payments at their current rates on lower revenue. He added that it is an “open question” whether tribes would keep making those payments at all if states cannot protect the exclusivity the payments were meant to buy.
Scenario 2: sportsbooks follow prediction markets
The second scenario assumes more major sportsbook operators move to prediction market models nationwide, risking their state licenses or abandoning them altogether.
Robinson said the shift is already underway, noting that operators are advertising prediction market products and launching them in states where they do not hold sports betting licenses.
“They clearly believe more money is to be made there,” he said.
The model does not assume all legal sports betting moves to exchanges. Some would stay with smaller operators and with tribes running their own sportsbooks. Even so, KlasRobinson estimates losses of $3.6bn a year for tribes and $14.3bn for commercial casinos and online operators, for $17.9bn in total. It also projects $3.6bn in lost state tax revenue, 92,000 lost jobs and $4.8bn in lost wages.
Klas said all of the scenarios cover a three- to five-year period after the market settles, and the losses would likely keep growing.
“As generations come up and become more accustomed to a prediction market-style operation being their means of access, the effect grows and grows,” he said. “The bleeding does not stop.”
That would affect state budgets, and it would hit tribes even harder.
“In the case of tribes, it is the profits from the business that fund the government and build their infrastructure,” Klas said.
Scenario 3: iGaming joins sports betting on PMs
The study’s third scenario adds iGaming-style products to prediction market offerings. Klas and Robinson did not cover during the webinar.
Klas did say it is “not hard to imagine” platforms applying the same legal reasoning they use for sports to other products.
“They are going to be aggressive and seize any crack, crevice they can to expand,” he said.
It is worth noting that the CFTC’s proposed rules around prediction markets would not allow casino game-style markets.
Scenario 4: the worst case for all
The fourth scenario is the worst case. It assumes prediction markets win CFTC approval for both sports contracts and iGaming-style products, and that major online gaming companies move as much of their business as they can onto those platforms in all 50 states.
KlasRobinson estimates tribes would lose $7.8bn a year, and commercial casinos and online gaming companies not tied to tribes would lose $31.6bn, for $39.4bn in total. It also projects $8.3bn in lost gaming tax revenue and 225,000 lost jobs.
Where the gaming money goes
Klas said the study centers on the displacement of consumer spending. In most gambling, the operator keeps only a small share of what customers wager and most of the money goes back to other bettors who win, he said.
At a casino, the winners are usually people who live in the same area, so the money stays in the local economy, he said. On prediction markets, the winning bettors are spread across the country and tend to be concentrated among a small group of sophisticated traders.
Klas said about 75% of net profits on Kalshi and Polymarket go to the top 1% of accounts.
Sportsbooks generally try to limit large betting syndicates because they distort lines, Klas said. Klas argued that exchanges have the opposite incentive. Prediction markets earn money on trading volume, so well-funded groups making large trades help its business.
Robinson called the result “95% leakage.”
“When it goes to prediction markets, it is for the most part uneducated gamers, and the people who win are the top 5% to 10%,” Robinson said. “That is the biggest difference. What can go wrong when you have unsophisticated investors in an unregulated market?”
Warning of gambling collapse
Klas ended the webinar by arguing that prediction markets threaten more than the gaming industry.
“If you were trying to create a scenario to destroy the gaming industry and destroy the derivatives and swaps markets, you could not have come up with a better way than what is being created here,” he said.
Klas said the current model is likely to “collapse under its own weight” within the next decade, in one of three ways:
- Consumer losses: So many people lose “their shirts, their homes, everything” that the public decides prediction markets are not worth it.
- Integrity scandals: Cheating scandals far larger than recent controversies spread across major sports leagues and associations.
- Market-maker failure: A large trading group overextends itself, bets wrong and can no longer cover its positions.
He compared the risk to the dot-com bust, the savings and loan crisis and the 1929 stock market crash, when buying on margin moved money from ordinary investors to the very wealthy.
Klas warned that if a collapse happens while the public still sees prediction markets as tied to sports betting, it could drag down the gaming industry with it. He said it could also damage trust in legitimate derivatives, such as options and swaps on commodities and interest rates, and prompt regulators to crack down on them.
“This is not something normal in the derivatives market,” Klas said. “This style is different and carries with it great danger.”
