The American Gaming Association projects $29.5 billion in legal NFL wagers for 2026 but warns that prediction markets are siphoning off growth and tax revenue as they offer sports contracts nationwide without state oversight
Legal sports betting on the NFL is hitting a wall. The American Gaming Association (AGA) now warns that the explosive growth seen since 2018 has ground to a halt, with the 2026 NFL season expected to generate $29.5 billion in legal wagers—barely above last year’s $29.4 billion. The culprit, according to the AGA, is the rapid expansion of prediction markets like Kalshi and Polymarket, which are now offering sports-related contracts in every state, including those where traditional sports betting remains illegal.
Prediction Platforms Disrupt the Market
Platforms such as Kalshi and Polymarket have moved aggressively into the sports space, marketing event contracts that functionally mirror sportsbook wagers but operate outside state gaming laws. The AGA claims these platforms have siphoned more than $1.3 billion in potential state gaming tax revenue since 2025, with Kalshi alone seeing an estimated $5.1 billion in sports-related volume from users aged 18–20. These contracts are available nationwide, bypassing the patchwork of state-by-state regulation that governs licensed sportsbooks.
While regulated sportsbooks are required to verify age, location, and compliance with state law, prediction markets have positioned themselves as financial exchanges, arguing that their contracts are investments rather than wagers. This distinction is now at the heart of a legal battle that could reach the U.S. Supreme Court, as regulators debate whether sports-event contracts fall under federal financial oversight or state gambling law.
Tax Revenue and Consumer Protection at Risk
The AGA’s figures highlight the stakes for state governments. Regulated sports betting supports 1.8 million jobs and generates roughly $18 billion in annual tax revenue, according to the association. By contrast, prediction markets pay no state gaming taxes and are not subject to the same consumer protection standards. The AGA warns that this regulatory gap leaves bettors—including teenagers and college freshmen—without the safeguards that licensed sportsbooks must provide.
Bill Miller, AGA President and CEO, has accused prediction market operators of misleading consumers by framing sports wagers as investments. He argues that this approach not only undermines state tax bases but also exposes young users to unregulated gambling. The AGA’s concerns echo findings from a reported earlier analysis that billions in Kalshi trading volume may be linked to underage users, intensifying scrutiny of age verification and regulatory compliance.
Legal Uncertainty and the Road Ahead
The legal status of sports contracts on prediction markets remains unsettled. The Commodity Futures Trading Commission (CFTC) and state gaming regulators are locked in a jurisdictional dispute over whether these platforms should be treated as financial exchanges or gambling operators. Until a definitive ruling emerges, prediction markets continue to operate in a gray area, expanding their reach while state-licensed sportsbooks face stagnant growth and mounting competition.
For now, the NFL season will open on September 9 with a high-profile rematch between the New England Patriots and Seattle Seahawks, but the real contest is playing out off the field. As prediction markets attract billions in volume and sidestep state oversight, the regulated sports betting industry faces a new era of uncertainty—one where the rules, tax flows, and consumer protections that defined the post-2018 boom are suddenly up for grabs. The AGA’s warning is clear: unless regulators close the loophole, the promise of a safe, transparent, and tax-generating sports betting market risks being undermined by platforms that answer to no state authority.
Understanding the difference between betting handle and revenue is essential in this debate. Betting handle refers to the total amount wagered by players, not the money sportsbooks or platforms actually keep. Gross gaming revenue is the amount operators retain after paying out winning bets, while tax revenue is calculated from that smaller figure. When prediction markets capture handle outside the regulated system, states lose not just the headline betting volume but the downstream tax revenue that funds public programs and regulatory oversight.
