USA
Regulatory changes are shaking up the gambling industry this month. From a key CFTC nomination that could impact prediction markets to states cracking down on sweepstakes casinos, lawmakers and industry leaders are making big moves. Meanwhile, New Jersey’s proposed tax hike on online gambling is facing bipartisan resistance, and operators are preparing for the future of event-based betting. Let’s dive into the most critical developments from the past month.
TLDR: a Bite-sized Overview:
- CFTC Nominee Signals Potential Changes for Prediction Markets: President Trump nominated Brian Quintenz as the next chairman of the CFTC. As a former commissioner and advocate for financial innovation, his leadership could shape future regulations for prediction markets, including platforms like Kalshi.
- Kalshi Expands, But Faces Regulatory Scrutiny: Kalshi secured partnerships with Robinhood and Webull to integrate prediction markets, but the CFTC suspended trading ahead of the Super Bowl, citing legal concerns. Meanwhile, DraftKings is preparing to launch its own prediction product.
- Florida Joins the List of States Targeting Sweepstakes Casinos: Lawmakers introduced HB 953 and SB 1404 to criminalize sweepstakes gaming operations, defining them as internet gambling.
- Bipartisan Pushback Against NJ Online Gambling Tax Hike: Governor Murphy’s proposal to raise online gambling and sports betting taxes to 25% faces resistance from industry leaders and lawmakers from both parties, who warn it could harm investments and jobs.
Incoming Regulations for the Prediction Markets Industry
Last month, President Trump nominated Brian Quintenz to be the next Chairman of the CFTC (Commodity Futures Trading Commission). Quintenz was nominated to Commissioner of the CFTC by Barack Obama, but this was delayed until Trump re-nominated him in 2017 when he was appointed and served until 2021.
During his time as Commissioner of the CFTC, he spoke about the need for a self-regulatory organization specific to the crypto industry to oversee companies. Between then and now, Quintenz has worked as the Global Head of Policy at Andreessen Horowitz for their a16zcrypto capital fund. In general, Quinentz has a track record of supporting DeFi (Decentralized Finance) and advocating for policies enabling a favorable environment for blockchain and crypto in the US. Additionally, Quinentz has served on the board of Kalshi since 2021.
As Chairman and proponent of financial innovation in derivatives markets, he is expected to work towards that goal. Given the regulatory scrutiny of prediction markets and the ongoing legal battle between Kalshi and the CFTC, this may have implications for the betting industry.
Kalshi has been on the offensive since they received a favorable ruling in October about offering election betting contracts for the US presidential election. The company has expanded its reach and even appointed Donald Trump Jr. to an advisory role to align Kalshi with the current administration ahead of regulatory changes.
Prediction market providers compete directly with traditional online sportsbooks, which have significantly stricter regulatory oversights. This creates unfair conditions for competition. Currently, Kalshi is available in 50 states, while legal online sports betting is only available in 38 states.
The CFTC announced its plans for a public roundtable to create an administrative record containing studies, data, expert reports, and public input from stakeholders. This record will inform the CFTC’s approach to regulating and overseeing prediction markets.
More Operators Planning to Offer Event Contracts for Sports
In February, Kalshi also secured partnerships with major trading platforms, such as Robinhood and Webull, to expand the availability of event contracts to retail traders. Their prediction markets were integrated into brokerages across the US ahead of the Super Bowl. However, the CFTC quickly suspended trading offerings pending reviews of the legality of such markets.
Given apparent headwinds for the prediction markets industry, namely the nomination of Brian Quintenz as chairman of the CFTC, Kalshi and its partners have reason to remain bullish on the planned expansion. Once regulatory clarity is achieved, we will see how events develop. Event contracts will likely become legally available under a new regulatory framework, allowing brokerages and traditional sportsbook operators to pursue licenses to offer prediction markets. Already today, DraftKings is preparing a DraftKings Predict product.
Florida Lawmakers Proposes Sweepstakes Gambling Ban
Every month, we see news relating to proposed bans on sweepstakes casinos. The latest in the wave of states that have made such announcements is Florida, where lawmakers propose a gambling sweepstakes ban.
Similar to the lawmakers in Mississippi, Maryland, and Connecticut, new bills were introduced in Florida, HB 953 and SB 1404 to criminalize sweepstakes gaming operations.
These bills broadly define internet gambling as a game where a player can win money or other “valuables” based on chance, even if skill is involved. This definition includes the games offered in sweepstakes casinos, such as blackjack, roulette, and online slots, accessed online through desktop or mobile devices.
As a result of this, we can expect sweepstakes operators to take precautionary measures and prohibit players from Florida from registering and playing.
Democrats and Republicans Are Pushing Back on NJ Governor’s Proposal of Raising Online Gambling Taxes
Governor Phil Murphy’s proposal to raise online gambling and sports betting taxes to 25% faces strong opposition from industry leaders and lawmakers. While the plan aims to generate $402.4 million in additional revenue, critics argue it could stifle investment, cut jobs, and push players to offshore markets. The Casino Association of New Jersey and the Sports Betting Alliance, including FanDuel, DraftKings, and BetMGM, warn that the increase comes when Atlantic City casinos are already struggling with declining tourism and growing competition.
Lawmakers from both parties are pushing back, calling the tax hike a threat to New Jersey’s gambling success. Senators John Burzichelli (D) and Michael Testa (R) issued a joint statement warning of job losses and slowed industry growth. Sen. Vince Polistina (R) argued that the state should lower taxes to maintain investment in Atlantic City.
Industry analysts predict major operators like Flutter and Entain could lose millions, leading to fewer promotions and worse odds for bettors. Murphy's proposal faces an uphill battle, with no apparent support in the Democrat-controlled Legislature. Last year, the committee stalled a similar bill.