20+ Lawsuits Target $10bn US Prediction Markets, Threatening DraftKings Expansion
At least 20 federal lawsuits and cease-and-desist letters challenge prediction markets as unlicensed sports wagering in states including New York, Massachusetts and Nevada, with Massachusetts AG securing an injunction barring Kalshi from sports contracts. DraftKings and peers entering this sector may face similar regulatory hurdles and tightened state licensing requirements.
1. Surge in Lawsuits
Over 20 federal lawsuits filed by state attorneys general and gaming regulators in at least five states including New York, Massachusetts and Nevada challenge prediction platforms like Kalshi and Polymarket as unlicensed sports wagering. Cease-and-desist orders and preliminary injunctions in Massachusetts and Nevada have temporarily barred sports-related event contracts without state licenses.
2. Federal vs State Oversight
Platforms classify offerings as “event derivatives” under federal commodities law overseen by the CFTC, arguing for exclusive federal jurisdiction. States counter that these markets evade state gambling laws, taxes and consumer-protection standards, sparking jurisdictional disputes that could ultimately reach the Supreme Court.
3. Market Growth Metrics
Prediction market activity surged with more than $1bn traded on Super Bowl Sunday and nearly $10bn in January volume on Kalshi alone. Established operators including DraftKings, FanDuel and Fanatics have launched their own platforms, collecting transaction fees on peer-to-peer “event contract” trades.
4. DraftKings Faces Regulatory Hurdles
DraftKings’ new prediction market offerings may face the same state licensing requirements, age limits and responsible gaming mandates imposed on traditional sportsbooks. Compliance costs and potential market restrictions threaten to delay regional roll-outs and affect revenue forecasts for its derivatives segment.