Pennsylvania gaming regulators are urging Congress to take action against the fast-growing sports predictions market, while their counterparts in Michigan warn that involvement in such products could cost sportsbooks their licenses.
In a letter sent to Pennsylvania’s members of Congress Friday, the Pennsylvania Gaming Control Board said the sports prediction markets offered on platforms like Kalshi and Crypto.com are “in reality, unlicensed sports wagering being conducted under the guise of commodity trading.”
Later that day, licensed operators in Michigan received letters from the Michigan Gaming Control Board warning that any participation in sports event contracts could impact their suitability for sports betting licensure.
Both letters build on a growing national push by state regulators to rein in federally regulated “event contracts,” which have allowed operators to list NFL spreads, totals, and even parlays nationwide under the oversight of the Commodity Futures Trading Commission, which has so far refrained from weighing in.
Pennsylvania urges Congress to act
In its letter, the PGCB called on Congress to ensure that sports wagering remains under state jurisdiction and not under the CFTC, which has allowed several exchanges to self-certify and list contracts on sporting events.
“Congress should reaffirm that sports wagering is a matter reserved for the states,” the board wrote, warning that permitting such activity under federal commodities law risks creating “a parallel, unregulated system of sports wagering” that undermines state oversight, consumer protection, and sports integrity.
That authority was established in 2018 when the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act, leaving regulation of sports betting to individual states. Since then, 39 states, Puerto Rico and Washington, D.C. have legalized some form of sports wagering.
Each jurisdiction requires operators to obtain licenses, pay taxes, and follow strict responsible gaming and integrity standards, obligations that prediction market exchanges currently avoid under federal oversight.
Michigan warns sportsbooks to steer clear
The MGCB’s letter, signed by Executive Director Henry Williams, was addressed to all licensed commercial casinos, sports betting operators and suppliers, iGaming platforms, and fantasy contest operators.
That includes DraftKings, FanDuel, PrizePicks, and Underdog, all of which have explored or entered the event-contract space.
“Any involvement in the offering of sports event contracts, directly or via an affiliate, key person, related business entity or other association will have implications relative to your licensure in Michigan,” Williams wrote.
The warning follows a series of recent enforcement actions in Michigan, including cease-and-desist orders against unlicensed casinos and offshore sportsbooks, underscoring the state’s aggressive stance toward unregulated gambling.
Four states and counting
With Pennsylvania and Michigan now joining Arizona and Ohio, at least four state regulators have issued formal warnings that ties to sports prediction markets could jeopardize sportsbook or fantasy licenses.
Elsewhere, regulators in Nevada, Maryland, and New Jersey have filed lawsuits or cease-and-desist orders against Kalshi, Robinhood, and Crypto.com, while Massachusetts’ attorney general has sued Kalshi outright, alleging the exchange is operating as an unlicensed sportsbook under state law.
The CFTC has yet to issue a formal rule on sports event contracts despite mounting pressure from states, tribal groups, and major sports leagues to clarify whether they constitute gambling or federally protected derivatives.
Industry caught between two systems
The widening divide leaves betting operators weighing whether to pursue prediction markets or risk angering state regulator, even as massive, untapped markets in non-betting states like California and Texas remain a powerful lure.
DraftKings has filed with the National Futures Association and is reportedly exploring the acquisition of Railbird Exchange. FanDuel has partnered with the Chicago Mercantile Exchange to develop an event-contract framework for later this year, while Underdog has gone furthest of the bunch, rolling out prediction products with Crypto.com in 16 states.
At the same time, Kalshi nearly hit $1 billion in sports trading volume during the final week of September, pushing its year-to-date total above $2 billion. And on Tuesday, Polymarket announced an up to $2 billion investment from the owner of the New York Stock Exchange, ahead of its U.S. relaunch.
