The American Gaming Association reckons states and tribes are out a billion dollars in tax revenue, and Bill Miller went on CNBC last Thursday to say it. Up from a $500 million estimate four months ago. That is a doubling, which says either prediction-market volume has exploded or the methodology has loosened. Probably both.
The underlying argument has been running for months. Companies like Kalshi and Polymarket let people put money on who wins the Super Bowl, but they call it a financial derivative regulated by the CFTC, not a sports bet regulated by state gaming boards. The CFTC is fine with that. Most state gaming regulators are not.
Forty-one state attorneys general have formally asked the CFTC to stop encroaching on sports betting. That kind of state-level coalition on a gambling-adjacent issue is rare enough that it counts for something.
The $1 billion number is interesting, and a bit slippery
Look, the maths matters. AGA appears to derive the figure by taking estimated handle on sports event contracts, applying an average state betting tax rate, and assuming most of that handle would have flowed through licensed sportsbooks if Kalshi and Polymarket did not exist. That last assumption is doing a lot of work.
A chunk of Kalshi volume comes from people who would not bet at FanDuel or DraftKings on principle. Some comes from financial-market traders who are not sports bettors at all. Some comes from people in states without legal sportsbooks who would have stayed cash. Strip those out and the number falls a fair bit.
Kalshi made exactly this argument in a response published the same day. Their position is that prediction markets are a different product serving a different audience, and the AGA is double-counting. Both sides have a financial interest in being right. Treat both numbers as marketing until someone produces the underlying data.
What the fight is actually about
Tax revenue is the framing. The real fight is over which agency gets to regulate what.
The CFTC has a much lighter touch than state gaming boards. No deposit limits, no problem-gambling levies, no responsible-gaming requirements at the federal level. If sports event contracts win the regulatory argument, every licensed sportsbook will want the same treatment. That would gut a consumer-protection structure built up since PASPA was struck down in 2018.
That is the consequential bit. The billion-dollar headline gets the cameras. The CFTC versus state regulator argument decides the long-term outcome.
What happens next
Congress is the only body that can settle this cleanly. Federal legislation that disadvantages prediction markets looks unlikely in the near term given the political climate around the CFTC. So the state AGs will keep filing, the CFTC will keep approving, and the AGA will keep updating its loss estimate upward.
Players in states with legal sportsbooks lose nothing immediately. Players in states without legal sportsbooks get a halfway-legal way to bet on football. Everyone else gets to watch.
The smart play for a regulator now is to figure out where the consumer-protection floor sits and whether the federal-derivatives route can be made to inherit it. So far nobody has shown much appetite for that. If any of the 41 state AGs files actual litigation, that forces a court to pick a side. I would write the follow-up if it does.