These fierce legal battles are reshaping gambling in America
What should gambling look like in America? A new wave of lawsuits and legislation is testing the boundaries.
We got a clearer picture of what it means to be a gambling society in the US last year. Sport betting soared as Americans legally wagered $148 billion on sports, 24% more than the year before, per the American Gambling Association's estimates.
But concerns also rose around gambling addiction and whether the industry is doing enough to protect the most at-risk, including young men. High-profile betting scandals rocked the sports world and highlighted the risks for athletes.
Culturally, there's been a growing sense that maybe the expansion of gambling "was too much too fast," Chris Grove, a prominent industry investor with Acies Investments, told Business Insider.
Some lawmakers have sought to rein in gambling companies. New York, which took more money on sports bets than any other state last year, is considering new guardrails on how much a person can bet in a day and on certain advertising practices, for example. There's also a renewed effort this year to introduce federal regulations on gambling.
Meanwhile, expansion of online casino legislation has screeched to a halt, leaving operators wondering where their next phase of growth will come from.
And new entrants and ways to risk money like sports predictions and sweepstakes casinos are disrupting the landscape — and drawing regulatory scrutiny.
Several industry insiders said it feels like these issues, which have been brewing for the last year or more, are all coming to a head in 2025. These key battlegrounds could define the future of the gambling industry and consumer protections.
Prediction markets are sucking up a lot of the oxygen in the room right now, five industry insiders said.
These markets let users across the country put money on potential winners of certain sporting events. Consumers can go on a website like Kalshi to "predict" who will win a series in the NBA playoffs, for example.
These markets are being run by commodities and financial platforms, rather than gambling operators. But Kalshi and some other companies offering sports predictions have received cease and desist orders this year from gambling regulators in several states, including Nevada and New Jersey.
Kalshi has taken the issue to the courts, arguing that it's regulated by the federal Commodity Futures Trading Commission, not these state gambling authorities.
The legal fights appear to be going Kalshi's way. The federal courts in Nevada and New Jersey have so far sided with Kalshi and blocked the cease-and-desists. This month, the CTFC also dropped an earlier appeal against the company's election predictions, signaling that the commission has a favorable view on prediction markets overall.
"Kalshi has won a couple of early rounds, but it is still early in the fight," said James Kilsby, chief analyst at Vixio, a regulatory tech company that works with the gambling industry.
A big question is how much fight the states have in them. The answer will likely tie back to how much tax revenue they risk losing, said Andrew Kim, an appellate and gaming litigator at Goodwin.
Kalshi and other sports prediction markets offer a very narrow product. So far, these platforms don't offer parlays or prop bets.
"There's definitely a path where all of that grows and becomes bigger and becomes an actual threat to the regime of sports betting," said Dustin Gouker, a gaming industry consultant who follows prediction markets closely in his Closing Line newsletter.
If sports predictions are cleared to continue, prediction markets could create a path for gambling companies to operate in all 50 states. Gambling operators DraftKings and FanDuel told investors on recent earnings calls that they're interested in a prediction market product.
"People in the industry at the moment are very much in a wait-and-see mode on this one," said Steve Ruddock, a gambling industry analyst and consultant. "What everybody needs to be concerned about in the industry is being left behind."
Sweepstakes casinos are under siege
While the early momentum for sports predictions suggests they may be here to stay, the future of online sweepstakes is less certain.
These games, from sites like Chumba Casino and McLuck, can resemble slots, table games, or sports betting, but they allow players to play for free and win digital coins that can be exchanged for cash. Users can typically also buy and wager these coins, which is where the line between sweepstakes and a regular online casino really starts to blur.
Several states, including New York, Connecticut, Illinois, and Montana, are considering banning them. New York's bill would make it illegal to operate, promote, or support these businesses.
Florida and a few other states also considered bills rejecting these games, but those efforts have either failed or stalled.
"The industry is very focused on sweepstakes operations," Kilsby said. "That is very much a major policy issue of 2025 that wasn't really the case in previous years."
It's a big deal in the industry because these games are regulated differently from online casino games, which can make them available to a wider set of consumers. Some, like a Washington court, say they're illegal gambling. Others argue they're simply innovating in a common gaming category: sweepstakes.
Several recent lawsuits have been filed against sweepstakes operators.
Rewriting the rules — and taxes — for gambling companies
Lawsuits against gambling companies are also piling up in 2025.
New cases are challenging marketing and promotional practices, such as VIP programs and certain bonus offers.
Baltimore City, for example, sued DraftKings and FanDuel in April over what it alleged are "predatory practices." The complaint called out both "bonus bets" and VIP programs, which are loyalty plays that the complaint says "personalize the inducements to gamble."
Customers sue gambling operators all the time — cases like these aren't new to the industry. But the "tidal wave" of recent consumer litigation could be a beachhead of a broader pushback, said Kim at Goodwin, who thinks the industry will likely see more of these lawsuits.
It's hard to tell what the lasting impact will be.
Kilsby said it's common for countries to experience a "regulatory reset" after a period of "liberalization" in regulated online gambling. A similar trend has played out in markets across Europe, with some countries imposing strict restrictions on gambling ads, for example. He pointed to US states like New York, New Jersey, and Illinois revisiting their gambling regulations, but said we've not yet seen efforts that have "dramatically redrawn the landscape."
"As this is a very universal dynamic for the industry, it's a very fair question to ask: How does the same trend play out in North America?" Kilsby said.
Some state regulators are also ratcheting up taxes on gambling and sports betting companies, as Kilsby and Grove pointed out. New Jersey's governor, for one, proposed hiking the tax rate for online gambling to 25%. Ohio's governor proposed doubling its tax rate on sports betting to 40%.
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