The American Gaming Association now estimates that states have missed out on more than $1 billion in tax revenue due to the rise of prediction markets.
In an appearance on CNBC’s “Squawk Box” detailing the estimate, association president and CEO Bill Miller said that the lost money has consequences for communities due to the taxes states collect on regulated gambling.
“It’s about states and tribes that are losing literally a billion dollars today in state and tribal revenue that would otherwise go to fund important community projects,” he said, referencing the consequences it has on Native American casinos’ revenues too.
Miller — whose organization is an advocate for casino operators, manufacturers and employees — said prediction markets amount to “backdoor sports betting.” The only difference, in his view, is that they aren’t regulated in the same way as sportsbooks.
States have made a similar argument to Miller, arguing that prediction markets’ sports event contracts amount to sports gambling and thus should be regulated by their local frameworks. However, the Commodity Futures Trading Commission views these contracts as falling within its jurisdiction to regulate swaps and derivatives.
Signage is seen outside of the US Commodity Futures Trading Commission (CFTC) in Washington, D.C., U.S., August 30, 2020.
Andrew Kelly | Reuters
While states have sued several prediction market platforms, asserting that they’re violating state law, the CFTC has responded by suing states that it said are impeding on its regulatory power.
“We also believe that the CFTC has an important role to play in the financial space in and around commodities, precious metals, and other things,” Miller said. “Where we differ strongly is the belief that the CFTC is enabling these prediction markets to operate national sportsbooks with very little to no regulatory oversight.”
President Donald Trump said in a Truth Social post on Tuesday that it is important the CFTC’s jurisdiction over prediction markets is maintained. The Office of Management and Budget is also reviewing a proposal for the CFTC to regulate prediction markets.
Prediction market platforms argue that they’re not equivalent to sports betting. The companies say they have economic utility — like through contracts related to macroeconomic events and politics — and are not simply gaming.
But Miller thinks the fact that the majority of prediction market volumes come from sports-related event contracts undermines that argument.
“These are individuals, these companies are marketing themselves as financial investing tools, when the reality is the vast majority of their business is sports betting,” he said.
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