Nelson Mullins attorneys Katherine Baker, Joshua Kirschner, and Samantha Ahearn wrote an article for issue 20 volume 8 of Sports Betting Operator, detailing the rise of prediction markets in the sports gaming marketplace and how operators face a wave of cease-and-desist orders and litigation from state gaming regulators, tribal operators, and attorneys general who argue sports-event contracts constitute illegal gambling.

“Prediction markets have surged to $44 billion in total 2025 volume, with sports a major factor in that growth, according to a report from Keyrock & Dune," they shared. “This is despite cease-and-desists from state gaming regulators, and a quagmire of litigation involving such regulators along with tribal gaming operators and plaintiffs’ law firms.They continued offering insight on the Arizona Department of Gaming case that demonstrated how even indirect involvement – partnering with a prediction market provider without offering products in-state – can trigger license revocation for existing gaming operators. Meanwhile, major sports betting and DFS platforms launching white-label prediction products now risk domino-effect suitability challenges across multiple jurisdictions, as regulators interpret partnerships as aiding illegal gambling conduct despite prediction markets' federal CFTC framework.

“Prediction markets present both opportunity and risk for the sports betting, and for the fantasy sports industry. While they offer innovation and potential new revenue streams, regulatory uncertainty is significant, subject to regulator and judicial discretion," they continued. “The recent action in Arizona underscores that state regulators may interpret even external partnerships with prediction markets as a threat to established gambling frameworks, with serious consequences, including license revocation."

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