Prediction Markets Have Cost States $600 Million in Lost Tax Revenue Over Last 12 Months

Written by :

Aaron Goldstein

Published on :

11 March, 2026

Play'N Go Head of Government Affairs Shawn Fluharty claimed during Wednesday's NEXT Summit NYC that prediction markets, primarily Kalshi and Polymarket, have cost U.S. states $600 Million over the last 12 months.

Polymarket has only recently re-entered the U.S. market after being granted clearance by the Commodity Futures Trading Commission (CFTC).

More than a dozen states are challenging sports event contracts in court, with many observers expecting the Supreme Court to ultimately decide their legality.

The current administration of U.S. President Donald Trump is supportive of this sector. Trump's son, Donald Jr., serves on the advisory board of Polymarket and as a strategic advisor with Kalshi.

DraftKings and FanDuel recently launched their own sports event contract platforms in December 2025, much to the dismay of state regulators. But the two companies lead in marketshare in most states where they are regulated.

Prediction markets have cost states $600 million in lost tax revenue over the past 12 months, Play'N Go Head of Government Affairs Shawn Fluharty said during today's NEXT Summit NYC
— Ryan Butler (@ButlerBets) March 11, 2026

According to gaming industry lobbyist Bill Pascrell III, the earliest we can expect to see a Supreme Court case on prediction markets is late 2027. Without a Supreme Court decision, prediction markets could run afoul of a future presidential administration.

Congress is also less likely to push for federal legislation of sports betting as this would cut off the spigot generated from the tax on gambling revenues.

To date, these states have warned Kalshi to cease offering event contracts, in particular sports markets, to its residents.

Arizona
Illinois
Maryland
Montana
Nevada
New Jersey
Ohio
Tennessee
Connecticut
New York

Massachusetts, Nevada and Michigan have had some success in filing lawsuits against Kalshi.

On Tuesday, Michigan's federal court preliminarily determined that sports-event contracts are not "swaps" subject to CFTC exclusive jurisdiction.

Entities like Kalshi continue to circumvent the gaming prohibitions imposed by (state law) and, in so doing, threaten the health, safety, and welfare of Michigan citizens," Michigan Attorney General Dana Nessel claims.

Massachusetts Attorney General sued to block sports event contracts and obtained a preliminary injunction restricting Kalshi from operating in the state.

Kalshi has filed suits of its own against New Jersey, Maryland and, more recently, Utah. The latter state does not allow any form of gambling.