Gambling New Arena: Can Prediction Marketplace Stir Up the Deep Waters of American Sports Business

Author: PANews, Zen

As Kalshi and Polymarket further shift their focus toward sports betting, prediction markets have reached a turning point this year with simultaneous growth in both volume and price: media reports indicate that Polymarket is negotiating a new round of financing with a target valuation of $12–15 billion; Kalshi has completed new funding mid-year, with a company valuation of approximately $2 billion.

Meanwhile, the monthly trading volume and daily active users on leading platforms have significantly increased — according to The Wall Street Journal, in October, the combined trading volume of the two platforms surged over 90% month-over-month; most of Kalshi’s trading volume growth comes from sports contracts, making sports prediction markets the main engine of its growth.

Driven by industry and capital, Kalshi and Polymarket are beginning to seek official partnerships and endorsements from major sports leagues.

The First Mover: NHL Leads the Way with Prediction Market Partnership

The North American Hockey League (NHL), the sports league with the lowest commercial value among the four major North American sports leagues, was the first to embrace prediction markets.

In late October, the NHL announced multi-year cooperation agreements with two prediction market platforms, Kalshi and Polymarket, becoming the first mainstream sports league to partner with such platforms.

This cooperation is seen as a signal that prediction markets are gaining increasing attention from the sports industry. Through this milestone agreement, the NHL grants Kalshi and Polymarket rights to use league official data, logos, and names, and allows them to display brand identities during live broadcasts.

NHL Chief Business Officer Keith Wachtel stated that, so far, prediction markets have not negatively impacted the league’s existing ten official sports betting partners; instead, they add incremental value to the ecosystem. Sara Slane, Head of Corporate Development at Kalshi, said this move validates their business model’s legitimacy.

Prediction market platforms operate differently from traditional sports betting companies. These platforms allow users to buy and sell “Yes/No” contracts on specific events (including sports game outcomes), with prices fluctuating based on market expectations.

For example, on Kalshi, users can trade contracts such as “Will a team win the championship,” with prices changing as the game progresses and probabilities shift. This trading mechanism is similar to how betting companies adjust odds based on game conditions, but prediction contracts are classified as financial derivatives, regulated by the U.S. Commodity Futures Trading Commission (CFTC), rather than gambling. This regulatory distinction means Kalshi and Polymarket do not need state sports betting licenses; theoretically, prediction markets can be accessible to users in states like California and Texas where sports betting is prohibited.

Therefore, the NHL believes that introducing prediction markets can attract tech-savvy and financially knowledgeable audiences, enabling more fans to participate in games in new ways. Through formal cooperation, NHL also gains influence over markets related to its league, preventing types of betting that could threaten game integrity. For example, markets based on individual player performance or roster changes might involve insider information or ethical risks; official partnerships allow NHL to have a say in which markets related to the league are permitted.

Additionally, the NHL has required Kalshi and Polymarket to adhere to integrity standards comparable to those of official sports betting partners, including using league-approved data providers and monitoring abnormal betting activity. Wachtel emphasized that collaboration with prediction platforms helps better safeguard sports integrity because “we, as a league, can participate in deciding which markets can go live, which benefits NHL and all sports organizations.”

Skepticism and Caution from NBA, NFL, and MLB

Compared to the NHL’s openness, the other three major U.S. professional sports leagues — NBA, NFL, and MLB — are more cautious and resistant regarding prediction markets.

These leagues have not established official partnerships with prediction platforms and have expressed concerns through various channels. Earlier this year, NBA, NFL, and MLB each sent letters to the CFTC emphasizing the importance of protecting sports integrity in this emerging market.

The NFL’s stance is particularly representative. In a written opinion to the CFTC, Jonathan D. Nabavi, the NFL’s Director of Public Policy, emphasized: “These contracts effectively simulate sports betting but lack the full integrity and consumer protections of regulated sports betting.”

In media interviews, David Highhill, Vice President of Sports Betting at the NFL, said the league would treat prediction markets as akin to sports betting and expressed concerns that “if not properly regulated, manipulation or price distortion could occur,” thus requiring protections and risk controls equivalent to licensed sports betting in each state.

Similarly, NBA and MLB have expressed comparable concerns. Although they have not publicly detailed their positions fully, their communications with the CFTC and industry feedback suggest their core worries revolve around game integrity and regulatory gaps. They question how the league can ensure that insider information isn’t exploited or that markets aren’t manipulated if fans and investors can bypass state laws to bet on game outcomes.

Their caution is not unfounded. Over the past two years, the NBA has experienced scandals involving betting arbitrage based on non-public injury or lineup information, highlighting the risks.

From a business perspective, all three leagues have deep partnerships with traditional sportsbooks, investing heavily to establish regulated betting systems. Prediction markets’ “edge cases” seem to bypass state laws and league agreements, raising management’s concerns.

However, the door is not entirely closed. Historically, the NFL strongly opposed sports betting legalization before 2018 but gradually began collaborating with compliant operators once the industry matured, indicating a potential shift as regulation and risk management improve.

NBA Commissioner Adam Silver has been more open-minded, advocating for regulation and oversight of betting markets early on. His stance suggests that, with proper regulation and risk controls, prediction markets could be integrated into the sports ecosystem.

The Betting Industry’s Strong Criticism: Risks to Sports Integrity

Compared to sports leagues’ cautious stance, the U.S. betting industry’s trade association, the American Gaming Association (AGA), has been the most vocal critic of prediction markets like Kalshi and Polymarket.

After the NHL announced its partnership, AGA Chairman Bill Miller publicly criticized it, calling the move “disappointing and extremely dangerous.” He labeled these prediction platforms as “backdoor gambling schemes disguised as ‘financial products,’” warning that such actions send a negative signal: in sports betting, integrity, responsibility, and clear legality are essential, and their neglect could undermine public trust.

The AGA’s primary concern is the risk to sports integrity and consumer protection. It points out that the U.S. has spent seven years building the world’s most robust and transparent legal sports betting market, which includes strict integrity monitoring, responsible gambling measures, and consumer protections.

Kalshi and Polymarket’s operation across states by bypassing local regulations is seen as evading oversight. Miller questions whether these platforms lack the rigorous compliance and player protections required by state regulators, potentially becoming hotbeds for illegal activity.

For example, without state oversight, how can they prevent minors from participating? How can they stop insider trading or large-scale market manipulation? The AGA considers these unresolved risks.

Furthermore, the AGA argues that commodity futures regulators do not have the same in-depth game monitoring and violation enforcement capabilities as state sports betting regulators. Placing sports betting under the jurisdiction of the CFTC may not effectively preserve game integrity.

Beyond regulatory criticism, the AGA is actively lobbying leagues. Shortly after the NHL announced its partnership, the AGA sent letters to the NFL, NBA, and MLB urging them to avoid collaborations with prediction platforms that lack sufficient regulation. The letter warned that partnering with such platforms could “undermine the legal market framework established over the past few years and pose reputational and legal risks to the leagues.”

It is expected that the AGA will continue to lobby regulators, lawmakers, and sports organizations to tighten policies on prediction markets, preventing a “regulatory vacuum” in sports betting.

Ongoing Legal and Regulatory Challenges, Prediction Markets in Litigation

Facing industry skepticism and resistance, Kalshi and Polymarket have actively sought endorsements but also face ongoing legal disputes. Over recent years, both platforms have been involved in enforcement actions and lawsuits with the CFTC and multiple state regulators, with their legal classification remaining contentious.

In early 2022, the CFTC initiated enforcement against Polymarket’s operator, Blockratize, Inc., alleging that the platform had offered event contracts without registration since June 2020, violating the Commodity Exchange Act (CEA). These contracts covered politics, economic indicators, and pop culture, essentially resembling binary options swaps. Polymarket settled by paying a $1.4 million fine and agreed to shut down all non-compliant markets to avoid further violations.

Kalshi’s legal situation is more complex and ongoing. As the only prediction exchange registered with the CFTC as a “Designated Contract Market” (DCM), it has the qualification to list event derivatives federally. Since early this year, Kalshi has launched multiple sports-related contracts (such as team advancement and championship winners), which have been traded without CFTC rejection.

However, these products have run afoul of certain state gambling laws. Several states, including New York, New Jersey, Massachusetts, and Ohio, have issued cease-and-desist orders, claiming these sports contracts are equivalent to unlicensed sports betting and must be halted within their jurisdictions.

Kalshi has not retreated but instead countersued the state regulators, seeking judicial rulings in federal courts. The core legal dispute concerns whether the Federal Commodity Exchange Act supersedes state gambling laws. Kalshi argues that, as a federally recognized exchange, its event contracts fall under federal jurisdiction, with the CFTC having exclusive authority, and states cannot interfere under local gambling laws. In its complaint, Kalshi states that the state regulators’ attempt to halt federally licensed trading is a deviation from Congress’s intent — establishing the CFTC to prevent fragmented regulation of interstate derivatives markets.

Currently, Kalshi’s legal battles extend to the federal appellate level. In June, a case against New Jersey’s gambling enforcement agency was appealed to the Third Circuit, with 34 state attorneys general filing amicus briefs supporting New Jersey.

These officials from states like New York and Michigan, which have legalized sports betting, as well as states like Utah and Idaho, which prohibit gambling altogether, agree that Kalshi’s contracts “are essentially sports bets disguised as commodities,” and that their interpretation of federal law aims to bypass state gambling sovereignty. They warn that allowing Kalshi to continue could weaken the regulatory framework established after PASPA’s repeal in 2018 and erode state authority in sports betting regulation.

Industry stakeholders, including the American Gaming Association, have also filed amicus briefs, emphasizing that the CFTC lacks the expertise to regulate complex sports betting and that allowing it to oversee sports betting-like contracts could undermine long-standing integrity protections. Some sports league officials worry that if Kalshi prevails, other exchanges might follow suit, creating a legal landscape where sports integrity and regulatory authority are severely compromised.

Conversely, Kalshi maintains that its contracts help hedge sports risks and provide liquidity, criticizing regulatory overreach as “stifling innovation.” CEO Mansoor claims that the coordinated opposition amounts to “censorship,” asserting prediction markets should be protected under free speech principles, prompting official rebukes.

The legal contest between Kalshi and state regulators continues to evolve. The outcome will not only determine Kalshi’s future but also influence how sports prediction markets are integrated into the U.S. legal system. In the short term, legal uncertainties remain a significant obstacle to platform expansion.

Entry and Resistance: Traditional Betting Giants Eye the Emerging Market

In response to prediction market platforms’ rise, traditional sports betting operators are not uniformly resisting; some see new opportunities and are investing or developing their own solutions to avoid falling behind.

U.S. leading online sportsbook DraftKings recently took notable action. In October 2025, DraftKings announced its acquisition of Railbird Technologies and plans to launch a new platform called “DraftKings Predictions,” offering contract trading based on real-world events.

Additionally, DraftKings announced a partnership with Polymarket, which will serve as the designated clearinghouse for DraftKings prediction market products, handling trade matching and settlement. CEO Jason Robins stated that integrating Railbird’s technology and Polymarket’s support will “enable us to succeed in this new growth market.”

Rather than oppose, some believe it’s better to participate. Analysts suggest that entering prediction markets allows DraftKings to expand into states where sports betting is not yet legal (via CFTC-regulated products) and serves as a defensive strategy: instead of losing users to Kalshi, they can proactively establish a presence. Market reactions show that on the day of the announcement, DraftKings’ stock rose about 2%, indicating investor confidence in this strategy.

Beyond DraftKings, industry giants like FanDuel are also closely monitoring this space. According to ESPN, FanDuel is “ready to enter the prediction market sector,” conducting internal assessments of technology and compliance.

The Competition Between Tradition and Innovation: Who Will Win?

Overall, the expansion of prediction markets in sports has sparked a contest between supporters and opponents. Advocates include innovative leagues like the NHL and capital investors like DraftKings, who argue that prediction markets offer new ways for fans to engage and serve as financial risk hedging tools, provided regulation and integrity measures are in place.

Opponents include most sports organizations, regulators, and vested interests, warning that prediction markets are growing outside the existing legal framework, risking long-term integrity and consumer protections. The debate centers on issues of sports integrity, legal authority, and market fairness.

Looking ahead, as courts rule on Kalshi’s lawsuits, regulators clarify their positions, and more leagues weigh in, the future of sports prediction markets in the U.S. will become clearer. If compromises are reached—such as adopting federal standards while respecting state rights—this emerging sector could be integrated into mainstream sports and bring new vitality to the industry. Conversely, escalating conflicts may force prediction markets to retreat, limiting their ambitions in sports.

As a neutral observer, PANews will continue monitoring Polymarket and Kalshi: whether they can overcome regulatory hurdles, gain league support, or adjust strategies in the face of resistance. The outcome of this game between tradition and innovation will influence the future landscape of sports betting and financial market integration.