US States Push Back Against Prediction Markets and Tax Loopholes

Shawn Fluharty, President of the National Council of Legislators from Gaming States (NCLGS), has issued a strong appeal to tribal leaders. He urges an offensive against companies operating prediction markets. These markets are profoundly disrupting the established gambling environment. Fluharty, a member of the West Virginia Legislature, spoke on the Indian Gaming Association's New Normal podcast.

The discussion followed an NCLGS meeting in San Diego. The gathering brought together key players in the gaming industry, including lawmakers, regulators, tribal leaders, and industry stakeholders. The main topics focused on shaping future gaming policies, with prediction markets high on the agenda. Tensions are running high.

Numbers and facts

Fluharty anticipates that the future of prediction markets will be decided by the Supreme Court. The court must clarify whether the federal government can regulate these markets. Should the companies lose that argument, they will turn to state lawmakers for approval. He emphasized that the legal position favors the traditional gaming industry.

A particularly sensitive example was provided by Victor Rocha, Chairman of the Indian Gaming Association conference, with North Carolina. There, prediction markets were approved with a significantly lower tax rate than traditional sports betting. Specifically, the tax for prediction markets from January will be 6% on net trading fee revenue. At the same time, the tax rate for online sports betting in North Carolina increased from 18% to 23%.

Former White House official, Mick Mulvaney, estimates that North Carolina is leaving over $100 million in tax revenue on the table as a result. Fluharty called this "revenue theft from states."

Another issue is that prediction markets often do not adhere to the 21-year age limit required for regulated gambling. This makes them vulnerable to "predatory behavior" against 18- to 20-year-olds.

"The companies that agreed to play by the rules and are now licensees deserve to be protected. They spent a lot of money to come in, they employ people, they pay all the fees, and use new technology. There was a promise made to them and it’s not the state reneging on it, but the disruptors, prediction markets changing the rules of the game and taking that contract and ripping it up for these licensees." - Shawn Fluharty, President of the National Council of Legislators from Gaming States (NCLGS)

Background

Operators of prediction markets often claim to be financial trading platforms, not gambling companies. CBS News New York revealed this in a January 2026 report. They argue that therefore only the Commodity Futures Trading Commission (CFTC) at the federal level is responsible for their regulation. But the reality is different. One example is a New York financial expert named Zade Abdulhadi, who bets on sports and politics every week. He openly states: "I know it's all betting, but I enjoy it a bit."

Kalshi, one of the largest prediction markets, has even filed a lawsuit against the state of New York. This happened after the New York State Commission, which regulates gambling, sent a cease and desist letter to Kalshi. Kalshi was accused of offering sports betting without a license. This shows how complex the legal situation is. The suspicion of insider trading is also high on these platforms. For example, an anonymous PolyMarket user allegedly placed $32,000 on the downfall of Venezuelan dictator Nicholas Maduro. Just hours later, President Trump announced Maduro's arrest, and the trader made $400,000. Such cases fuel concerns about illegal activities. DJ Hennis of KPMG points out that using non-public information for trading in these markets is already illegal. The challenge lies in enforcing existing rules.

Shawn Fluharty stressed the importance of the regulated industry educating the public. This aims to clarify misunderstandings about legal and illegal offerings. He warned that negative incidents in prediction markets could damage the image of the entire gambling industry because public perception would then generally categorize gambling as bad. The chairman of the Nevada Gaming Control Board, Mike Dretizer, also spoke out against prediction markets. Nevada has been fighting for some time to keep them out of the state.

Why it matters for German players

For German players, this debate in the US is primarily interesting, but the direct impact is rather minor. Germany's Gambling State Treaty 2021 (GlüStV 2021) has created a very clear and strict regulation for online gambling. Prediction markets, as they exist in the US and are often declared as financial products, do not fit into the German licensing model.

The Joint Gambling Authority of the Federal States (GGL) grants licenses to providers who comply with strict requirements. These include the 1-euro stake limit per spin for slot machines and the 1,000-euro monthly deposit limit, which is controlled via the central monitoring system LUGAS. Prediction markets, which are often based on political or economic events and allow significantly higher stakes or more complex betting structures, would not meet these requirements. A legalization of such markets under the current GlüStV 2021 is therefore very unlikely in Germany. German players should exclusively stick to GGL-licensed providers to be on the safe side.

What it means for GGL-licensed casinos

German online casinos with a GGL license operate in a strictly regulated environment. The example of prediction markets in the US shows the problems that arise when gray areas exist or loopholes in legislation are exploited. For GGL-licensed casinos, regulation and compliance with the law are their greatest advantages. They offer players security, player protection, and reliable payouts.

The 1-euro limit per spin and the monthly deposit limit of 1,000 euros, combined with the connection to LUGAS, are intended to promote responsible gaming. While a debate about age limits and potential revenue losses is raging in the US, German players benefit from a system that has clearly defined rules. The GGL closely monitors the market and takes action against illegal providers. For licensed casinos, this is a clear competitive advantage over unregulated offerings.