The ongoing expansion of prediction markets as a gambling alternative should continue to be one of the most dominant trends in the industry, both in the United States and abroad. The rise of companies such as Polymarket and Kalshi that now offer contracts on sporting events in addition to entertainment options, political markets, and other financial indicators has reshaped the space and attracted new market entrants, including entrenched gaming powers. The arrival of FanDuel and DraftKings, FanDuel through a partnership with CME Group and DraftKings through its acquisition of Railbird Exchange and launch of DraftKings Predictions comes with a whole new array of questions, most notably the reaction from state regulators who have tried to steer regulated gaming operators away from the prediction space.

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Pending court battles will also dominate the conversation, as both sides seek legal clarity on the types of contracts that pass muster under federal law. Favorable rulings for the prediction industry, and a continued hands-off approach from federal regulators, could radically re-shape the regulated gaming space, while a favorable ruling for regulators could restore the status quo and leave some in the space vulnerable to potential enforcement actions. Those in the regulated space are faced with a difficult choice – risk the wrath of regulators and other law enforcement officials, or risk being left behind as competitors establish a presence in all 50 U.S. states that may not be able to be usurped later.

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While prediction markets may be on the way up, the once-burgeoning sweepstakes industry took several major hits in 2025 as several states, including major prizes such as California and New York, passed legislation to curtail the popular dual-currency model of sweepstakes gaming, and forced companies to rethink their gameplan in the state.

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2026 will give more clarity whether the bad year for sweepstakes was a blip and something the industry can weather, or whether it was simply the first wave as more states follow suit in enacting their own legislation or pursuing enforcement actions. Operators, as well as suppliers of sweepstakes services such as payment processors and game providers, should remain mindful of legislative developments and keep tabs on what specific prohibitions states enact, as each state may take a different path in their attempts to curtail the activity.

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