In recent months, the boundary between state-regulated sports betting and federally sanctioned prediction markets has grown dangerously blurred. Platforms like Kalshi, Crypto.com and Robinhood have begun offering “event contracts” on sports outcomes, claiming regulatory shelter under the Commodity Futures Trading Commission (CFTC). This maneuver has enabled them to sidestep state gaming laws, placing licensed operators in a precarious position—forced to compete with platforms operating under an entirely different set of rules.
This isn’t just a legal quirk—it’s a direct challenge to the integrity of the state-based sports betting framework. State-licensed operators are held to rigorous standards involving taxation, consumer protection, responsible gaming and regulatory compliance. CFTC-regulated platforms, by contrast, operate with far fewer obligations, eroding regulatory parity and undermining the ecosystem states have worked so carefully to build since PASPA was overturned in 2018.
Now, just as the U.S. sports betting industry is maturing, it faces a disruptive force—not grounded in innovation, but in regulatory arbitrage. The current leadership at the CFTC has remained conspicuously silent—even canceling a much-anticipated roundtable meant to hear from the industry. Meanwhile, litigation is underway in several states challenging the legality of these federal offerings. In the absence of regulatory clarity, opportunistic actors are gaining ground—and fast.
Why a Unified Response Is Urgent
The worst path forward would be for each licensed operator to replicate Kalshi’s national model. Doing so risks not only legal consequences from their own state regulators—especially in jurisdictions with strict controls or where sports betting is still prohibited—but also fragments the market further and weakens its foundations.
A patchwork of competing prediction platforms would trigger a customer acquisition arms race, drive up marketing costs, and cannibalize liquidity—ultimately diminishing the efficiency and transparency of the market.
Instead, operators should pursue a shared solution: a cooperative alliance such as the Network Association of Sports Betting Operators Exchange (NASBOE) that I founded. Under this framework, bets continue to be placed legally with state-licensed operators and become tradable on BetEx, a multi-jurisdictional exchange infrastructure.
This model allows each operator to maintain control over customer interactions and compliance obligations, while accessing shared liquidity and a standardized exchange trading system. Crucially, customer identities remain private—protected in the same way broker-dealers handle trades in securities markets, without disclosing end-user identity to the exchange or other brokers.
ETBs: A Smarter Way to Compete
At the core of this infrastructure is the Exchange Tradeable Bet (ETB)—a standardized binary wagering contract that complements traditional sportsbook bets.
ETBs are simple Yes/No contracts placed through licensed operators within state boundaries. Once accepted, they become tradable on a centralized exchange—offering enhanced flexibility, market-based pricing and risk management for both operators and bettors.
Key advantages include:
- Wire Act compliance: Bets are placed entirely intrastate, ensuring legality before any cross-jurisdictional trade.
- State taxation integrity: ETBs preserve current tax structures and can generate new tax revenue through increased trading volume.
- No federal preemption: ETBs are not commodities or securities and remain under state gaming jurisdiction—not the CFTC or SEC.
- Operator risk hedging: Operators can dynamically manage exposure through the exchange, similar to market makers in capital markets.
- Anonymity and privacy: Orders are processed by the originating operator, safeguarding customer identities in line with broker-dealer practice.
An Industry at a Crossroads
The stakes are high. If the industry fails to organize, federally authorized prediction markets may gain irreversible momentum—reshaping the legal landscape and undermining state sovereignty. But if licensed operators act now, through a collaborative, multi-jurisdictional alliance rooted in compliance, innovation and transparency, they can secure both autonomy and future relevance—especially as regulatory clarity evolves.
NASBOE and BetEx provide the foundation for that response. Their modern, interoperable infrastructure invites participation from tribal and commercial operators alike preserving the central role of states and sovereign tribal nations as the true regulators of sports wagering.
Conclusion: Don’t Let Inaction Define the Future
While the legal fight over prediction markets plays out in courtrooms and administrative offices, the competitive dynamics are already shifting. The question is not whether to respond—but how.
This is not the time for hesitation or duplication. It’s the moment to build a legally sound, networked alternative that honors state oversight while enabling responsible, cross-jurisdictional trading.
ETBs represent a sustainable, scalable solution. The time for sportsbooks to launch a multi-jurisdictional prediction market is now.
