AGA Reports Over $1 Billion in Lost State Tax Revenue from Prediction Markets in 2026

The American Gaming Association released new figures in May 2026 showing that states across the country have lost more than $1 billion in potential tax revenue because of prediction markets operating without the same oversight applied to traditional sports betting platforms, and observers note these markets function as unregulated backdoor alternatives in multiple jurisdictions.

Details Behind the Revenue Estimate

Data from the AGA points directly to contracts on events like sports outcomes that bypass state licensing requirements, which means platforms avoid paying taxes that would otherwise support community projects funded through regulated gaming, while Bill Miller as president and CEO emphasized how these shortfalls affect both state budgets and tribal gaming operations that contribute to local economies.

Those who've tracked the growth of prediction markets see the expansion of sports-related contracts as the main driver behind the shortfall, and figures reveal that the absence of uniform taxation creates gaps where revenue could flow into public services if the same rules applied across the board.

Regulatory Disputes and Legal Actions

Ongoing conflicts between the Commodity Futures Trading Commission and various state regulators continue to shape how these platforms operate, and lawsuits filed by states against prediction market companies highlight disagreements over whether sports event contracts fall under federal commodity rules or state gambling laws.

Platforms such as Kalshi and Polymarket now face increased scrutiny over their offerings, with regulators examining tax implications and compliance standards that differ from those imposed on licensed sportsbooks, and this environment creates uncertainty for operators while states push for clearer boundaries on what qualifies as permissible activity.

Role of Key Platforms in the Current Landscape

Kalshi and Polymarket have expanded their sports-related event contracts in recent months, drawing attention from both lawmakers and industry groups who argue that these products mirror traditional betting but operate under different regulatory umbrellas, and the result shows up in the AGA's calculation of missed collections.

Market participants continue to place wagers on these platforms despite the disputes, and data indicates that the volume on sports outcomes has grown enough to account for the billion-dollar figure cited in the May 2026 report.

Looking at Enforcement and Future Steps

State attorneys general and tribal representatives have pursued legal avenues to address the regulatory gaps, while the CFTC maintains its position on the classification of these contracts as commodities rather than gambling products, and this tension leaves room for continued litigation that could reshape how prediction markets handle event-based trading.

Industry analysts tracking the situation note that any resolution will likely determine whether states can collect taxes comparable to those from licensed sportsbooks, and the current path suggests ongoing negotiations between federal and state authorities over jurisdiction.

Conclusion

The AGA estimate released in May 2026 underscores the scale of revenue shifts tied to prediction markets, and stakeholders across government and industry continue to monitor developments involving Kalshi, Polymarket, and the broader regulatory framework that governs sports event contracts. AGA estimate on sports event contracts provides additional context on the positions outlined in the report, and observers expect further clarification from courts and regulators in the months ahead.