Prediction Markets Diverted $500 Million in Sports Betting Taxes, AGA Says

Prediction markets have diverted more than $500 million in potential sports betting tax revenue from U.S. states to date, according to estimates released by the American Gaming Association, as the trade group warned that federally regulated event contracts are increasingly competing with state-licensed sportsbooks.

The estimate was included in the AGA’s latest commercial gaming revenue update, which showed the broader U.S. gaming industry generated a record $78.72 billion in gross revenue in 2025. That figure represents a 9.2% increase over 2024 and marks the sixth consecutive year of record revenue, the group said.

State and local governments collected $18.09 billion in gaming tax revenue last year, a 15.1% increase from 2024. Traditional casino gaming accounted for $11.33 billion of that total. Sports betting generated $3.71 billion in taxes, reflecting a 32.4% year-over-year increase.

Despite those gains, the AGA signaled concern over the rapid growth of prediction market platforms offering sports-related event contracts. The organization estimated that more than $500 million in potential sports betting tax revenue has been diverted as consumers place wagers through prediction markets instead of state-regulated sportsbooks.

“With 2025 marking another record year, the industry’s performance reinforces a clear principle,” AGA President Bill Miller said in a statement accompanying the release. “Sports betting belongs under state and tribal regulation. That’s how consumers are protected and how communities share in the benefits.”

Prediction markets such as Kalshi and Crypto.com allow users to trade contracts tied to event outcomes, including sports contests. Unlike traditional sportsbooks, these platforms operate under federal commodities law rather than state gaming frameworks, creating a regulatory divide that has become the focus of ongoing legal disputes.

The AGA, which represents commercial and tribal casino operators as well as sportsbooks, has consistently argued that sports-related event contracts function similarly to traditional sports wagers and should therefore fall under state oversight and taxation.

The $500 million figure reflects the association’s estimate of foregone tax revenue rather than total handle or gross gaming revenue attributed to prediction markets. The AGA did not provide a detailed breakdown of how the estimate was calculated, nor did it specify a timeframe beyond “to date.”

Several states are currently engaged in legal challenges that could determine whether prediction markets are permitted to continue offering sports-related contracts within their borders. The outcomes of those cases may influence how such platforms are taxed and regulated going forward.