NextFin News - The rapid expansion of prediction markets has deprived U.S. states and Native American tribes of more than $1 billion in tax revenue, according to a new estimate by the American Gaming Association. The claim, made on Thursday by the association’s president and chief executive, Bill Miller, marks a significant escalation in the lobbying battle between traditional casino operators and the fast-growing platforms that allow users to trade contracts on real-world events.
Speaking on CNBC, Miller argued that prediction markets are effectively operating as "backdoor sports betting" networks. Because these platforms bypass the stringent state-level licensing and tax frameworks imposed on traditional sportsbooks, they are able to offer national wagering with minimal local oversight. The resulting tax shortfall, Miller asserted, directly harms local communities by starving them of revenues that would otherwise fund public infrastructure and tribal development projects.
As the head of the nation’s most powerful casino lobby since 2019, Miller has consistently maintained a highly protective stance over the regulated gaming industry. His tenure has been defined by aggressive campaigns against unregulated or "gray-market" betting operations, which the association views as existential threats to its members' market share. Consequently, his latest $1 billion estimate reflects the advocacy of an industry group seeking to defend its turf, rather than an objective, neutral economic assessment.
This $1 billion figure is highly controversial and does not represent a mainstream consensus among economists or financial analysts. The estimate relies on the critical assumption that capital flowing into prediction markets would otherwise have been spent on state-taxed sportsbooks or casino games. This premise lacks independent, third-party validation. Many market observers suggest that prediction market participants, who often view themselves as financial traders or political enthusiasts, might simply withdraw their capital from the ecosystem entirely rather than transfer it to traditional sports betting if prediction markets were restricted.
The core of the dispute lies in "sports event contracts" offered by some prediction platforms. State regulators argue these contracts are indistinguishable from sports gambling and should fall under local state frameworks, which tax sports betting revenues at rates as high as 51% in jurisdictions like New York. Conversely, the Commodity Futures Trading Commission views these contracts as swaps and derivatives, placing them firmly under federal jurisdiction. This regulatory friction has already triggered a flurry of litigation, with states suing prediction platforms for violating local laws, and the federal agency countersuing states to defend its regulatory preemption.
Prediction market operators, including Kalshi and Polymarket, strongly reject the "sportsbook" label. They argue their platforms serve a vital economic purpose by providing public hedging tools and aggregating crowd-sourced data on macroeconomic trends, corporate earnings, and political events. Furthermore, federal oversight is not absent; the Office of Management and Budget is currently reviewing a proposal that would formalize the federal agency's regulatory framework for these markets, potentially bringing more structure without state-level gambling taxes.
The political stakes are rising. U.S. President Trump weighed in on Tuesday, posting on Truth Social that maintaining the federal agency's jurisdiction over prediction markets is essential. This intervention by U.S. President Trump signals a preference for federal oversight over a patchwork of state-level bans or taxes, potentially dealing a blow to the gaming association's lobbying efforts. The outcome of this jurisdictional battle will ultimately decide whether prediction markets continue to operate as low-tax financial exchanges or are forced to integrate into the highly regulated, heavily taxed state gambling apparatus.
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