The power of prediction markets

I feel like the online gaming industry – and indeed even some consumer-facing apps across the spectrum – will be trying to figure out how to be more things to their users. We can already see this showing up in some ways: FanDuel launching fantasy pick’em, Betr launching an arcade, Robinhood adding sports betting. I think we’ll see more of this momentum in the short- to medium-term:- Sports betting via prediction markets isn’t going anywhere, at least for a little while. DraftKings and FanDuel are getting involved; Underdog already launched a prediction markets integration. The question is how far this will go, and who will participate. In the gaming industry, you could imagine a scenario where nearly all sectors look to go this route; more regulated sports betting operators, fantasy apps, sweepstakes sportsbooks and casinos, etc. It’s arguably easiest for the fantasy sector to get involved, given lower regulatory hurdles.- Fantasy pick’em – especially the peer-to-peer variant – is now arguably a very light shade of gray around the country (in the places where it’s not a truly white-market product). The notable exception remains California, but the risk of operating fantasy in much of the rest of the country seems very low. As the industry gets more and more clarity, could we start seeing more players in the space? More M&A? With legalization of online sports betting and casinos stalled, fantasy seems like a natural place for companies to start exploring more seriously. Given the reduction of TAM for sweepstakes, this might also be a fit for those companies.- The skill-game category is getting more traction. Triumph – which offers peer-to-peer skill gaming – is routinely No. 1 in the App Store for “casino games.” Adding skill games to fantasy apps – which are already often using a similar “game of skill” legal strategy – seems like the most natural and frictionless fit. But it likely won’t stop there.Beyond that, the only limit might be the creativity of the companies in the space. Sportsbooks already see themselves as content and a place to consume sports, not just bet on them. Can they just become the sports apps (ie ESPN, Apple Sports, etc.) of the future with some hard work and smart marketing? And with financial companies endeavoring to become sports betting exchanges, might sportsbooks eye being financial platforms down the road? It’s perhaps less far-fetched than it might sound for some of the biggest brands in the space.

Kalshi’s legal battles with states, which appear destined to create contradictory Circuit Court rulings, are being billed as the Main Event, but the ‘Fight of the Night’ might be on the undercard. The cases to watch are Massachusetts v. Kalshi and the tribal lawsuits filed in California and Wisconsin, which have introduced additional pathways to the Supreme Court.Unlike Nevada, New Jersey, Maryland, Ohio, and New York, Massachusetts didn’t issue a cease-and-desist order. The Massachusetts case, filed in state court, was strategically designed to force Kalshi to litigate under broader state gambling laws rather than narrowly on federal preemption under the Commodity Exchange Act (CEA). On October 28, 2025, U.S. District Judge Richard Stearns granted the state's motion to remand, sending the case back to the Massachusetts Superior Court in a potential watershed moment.The Kalshi disputes are emblematic of broader 2025 trends, in which prediction markets are experiencing a surge in popularity but are facing intensified regulatory pushback. Currently, regulators and courts are grappling with whether prediction markets are commodities (under the CEA) or constitute gambling. Big-picture implications: Massachusetts' strategic move forces Kalshi to defend on broader grounds under state gambling law, potentially weakening its federal preemption arguments and encouraging similar preemptive suits elsewhere to sidestep favorable federal venues. This could lead to a patchwork of state-level restrictions, complicating nationwide operations.The tribal lawsuits are even more intriguing, as they highlight tensions between CFTC oversight and tribal sovereignty, potentially reshaping the interaction between federal regulations and IGRA. If escalated, it could draw Supreme Court scrutiny on two fronts:The boundaries of "gaming" in digital markets.The Pandora’s Box issue that is ‘where does a bet take place.’ Unlike pure state-federal preemption disputes, the tribal lawsuits (filed in California in July 2025 by three tribes and in Wisconsin in August 2025 by the Ho-Chunk Nation) allege Kalshi's markets violate IGRA and tribal compacts, distinguishing them from Kalshi's CEA-based defenses in its state suits. The Ho Chunk tribe in Wisconsin has added a RICO charge for good measure.Big picture implications: These suits could expand IGRA's reach to digital platforms, eroding CFTC authority on tribal lands and setting precedents for how federal commodity rules intersect with sovereign rights. A tribal win might prompt prediction markets to shift toward decentralization or offshore models to circumvent restrictions.We are also seeing a coalescence of opposition against prediction markets. Tribes have sought amicus involvement in related state-federal battles, such as Robinhood's suit against Massachusetts, signaling collaborative efforts that could amplify IGRA arguments across dockets.As the issue heads toward the inevitable Supreme Court showdown, 2026 will be the setup year. Whether it’s unraveling the delicate threads of federal preemption, tribal sovereignty, the location of digital gaming, or simply the definition of gaming, the smart money is on a resolution coming in 2027, or perhaps later.What to Watch for in 2026:A Strategic Shift: If Kalshi begins to lose ground in court, there could be a strategic shift toward clearer federal frameworks and perhaps differentiated regulation.Collaborative Opposition and Amicus Strategies: Gaming interests, including tribes and state Attorneys General, are uniting via amicus briefs and joint lobbying.A Branding Shift: 2026 could also bring about a branding change, where contracts emphasize "hedging" over "betting.”Geo-Fencing: Given the recent ruling in Massachusetts and a court that appeared sympathetic to tribal concerns in California, Kalshi may be forced to implement robust geo-blocking to avoid tribal lands or hostile states, which would undermine its geolocation claims (too costly and logistically challenging to implement) as well as its claim that this would violate CFTC rules by not operating on a nationwide basis or making contracts available uniformly to all eligible U.S. participants.The Big(gest) Ripple: Supreme Court involvement might settle enduring questions on digital "bet location," impacting not just prediction markets but crypto, online poker, esports betting, and more.