Who Are the Main Players in the Three-Way Sports Betting Fight?
The fight over sports-related contracts is often described as a clash between sportsbooks and prediction markets. That leaves out a third group: offshore bookmakers, which serve customers outside the state licensing systems that govern legal U.S. sports betting. The three groups may all offer ways to take a position on a game, but they do not operate under the same rules—or necessarily offer the same legal product.
At the center is a jurisdiction dispute. State regulators say sports wagering is gambling and belongs under state gambling law, including licensing, age checks, consumer protections and limits on where bets can be accepted. Prediction market companies argue that certain event contracts fall under federal derivatives law and the authority of the Commodity Futures Trading Commission (CFTC). Offshore bookmakers, meanwhile, generally operate without the state licenses required to take sports bets from customers in those states.
That difference matters. A sports contract listed on a federally regulated platform is not automatically the same thing as a wager accepted by a state-licensed sportsbook. Nor does calling a product an “event contract” settle whether it is lawful in every state. The answers are being contested in regulatory actions and courts, where preliminary injunctions and disagreements among jurisdictions have left the boundaries unsettled.
The Three Groups in the Fight
1. State-licensed sportsbooks
State-licensed sportsbooks are the familiar legal operators: companies that take sports wagers under licenses issued by state regulators. Their business is built around state-by-state authorization. They may need to meet rules for identity checks, responsible-gambling programs, tax what is an event contract payments, advertising, data security and the handling of customer funds. The details vary by state.
These operators have a clear reason to scrutinize sports contracts sold outside the sports-betting framework. If a product gives customers a way to trade on game outcomes, licensed operators may argue that it competes with sports wagering while avoiding requirements that apply to them. That is an industry position, not proof that every event contract is legally a sports bet. The legal classification depends on the product, the relevant statute and the regulator or court assessing it.
State regulators also have a direct consumer-protection interest. They can generally supervise licensees and investigate suspected illegal gambling within their jurisdiction. They do not, however, automatically control every product that touches a sports outcome. The central question is whether a particular contract is gambling under state law, a federally regulated derivatives product, or an activity subject to overlapping rules.
2. Offshore bookmakers
Offshore bookmakers take bets from customers in markets where they may lack local authorization. “Offshore” describes where an operator is based or licensed; it does not mean the service is legal for a customer to use in every U.S. state. These operators generally do not hold the state sports-wagering licenses that allow regulated books to advertise and accept bets under state oversight.
The contrast with prediction markets is important. Offshore bookmakers are not made lawful by describing a wager as a contract or by using digital payments. And a stablecoin payment does not make a transaction untraceable or immune from intervention: stablecoin issuers may be able to freeze tokens, and payment providers can restrict access. The relevant legal questions still include who is offering the product, where the customer is, and what laws apply.
Offshore operators are part of the wider competitive landscape, but they are not the main legal challengers in the current derivatives-law debate. Prediction market companies make a more specific argument: that federal commodities law governs their contracts and limits states’ ability to regulate them as gambling. Offshore bookmakers generally do not make that same claim simply by taking sports bets.
3. Prediction market companies
Prediction market companies offer contracts whose value is tied to the outcome of an event. A sports contract might rise or fall based on who wins a game, for example. Customers may buy or sell contracts, and a displayed price can be interpreted as an estimate of the market’s implied probability. That trading format is different from the familiar sportsbook model, where a customer places a wager at posted odds.
Kalshi is a prominent company in this dispute. It has argued that event contracts on its federally regulated exchange fall under the CFTC’s authority and the Commodity Exchange Act, rather than state gambling rules. That position has faced challenges from state regulators, particularly where contracts relate to sports outcomes. A company’s federal regulatory status is significant, but it does not by itself answer every question about a kalshi alternative for sports specific contract or state’s authority.
Crypto.com has also entered the sports event-contract market, adding another company to the group testing the line between derivatives and gambling. Robinhood has brought event contracts into its app as well. Robinhood’s exchange infrastructure routes event contracts, connecting customers to the relevant trading venue. That infrastructure detail may help explain how the product is delivered; it does not, on its own, resolve whether a state can regulate a sports contract as gambling.
Contracts Traded Are Not Dollars Wagered
One source of confusion is the way activity is reported. A platform may cite the number of contracts traded, the number of transactions, open interest, or the dollar value of trading. Those measures are not interchangeable with dollars wagered at a sportsbook.
- Contracts traded usually refers to units bought or sold. The same contract may change hands more than once.
- Trading volume may refer to the total number of contracts or their notional value, depending on how the platform defines it.
- Dollars wagered usually describes the amount customers stake with a sportsbook, though reporting methods can also vary.
A headline that compares contracts traded with sportsbook handle without explaining the measurement is not a like-for-like comparison. And claims that a platform is “taking bets” may sound intuitive, but can obscure the legal question: is the product a wager under state law, a derivatives contract under federal law, or something courts have yet to classify consistently?
The Jurisdiction Fight: State Gambling Law vs. Federal Derivatives Law
State gambling laws generally govern the licensing and operation of sports betting within a state. Federal derivatives law, principally the Commodity Exchange Act, governs certain commodities markets and gives the CFTC authority over designated contract markets and related activity. Prediction market companies rely on that federal framework to argue that their contracts should not be treated as ordinary sports wagers.
The competing claims do not fit neatly into a simple “federal law always wins” or “states always control” rule. A federal regulator may have authority over an exchange or a category of contracts, while states may argue that a product is illegal gambling under their laws or that the federal framework does not cover the particular sports contract at issue. The scope of federal preemption—when federal law displaces state law—is a central dispute.
The CFTC’s role is not the same as a state sports-betting regulator’s role. The CFTC oversees derivatives markets and can take action under federal commodities law. State regulators, by contrast, license sportsbooks and enforce state gambling statutes. Their different mandates can sportsbooks accept bitcoin help explain why the same product can draw scrutiny from more than one direction.
How the Fight Is Being Waged
Cease-and-desist orders and enforcement campaigns
State regulators have used cease-and-desist letters and orders to challenge platforms they believe are offering unlicensed sports wagering. They may warn a company to stop serving residents, demand that it comply with state law, or pursue additional enforcement if it does not. States can also use broader enforcement campaigns to investigate platforms, vendors and other businesses that may help deliver or promote disputed products.
A cease-and-desist demand is a regulator’s position, not a final court ruling. A company may comply, challenge the state’s authority, or continue operating while litigation proceeds. The existence of an order therefore shows that a regulator is asserting jurisdiction; it does not, by itself, settle whether the regulator is right.
Subpoenas and information requests
Investigations can reach beyond the platform itself. Regulators may seek records from vendors, payment firms, advertising partners or technology companies to understand how a product is marketed and distributed. Connecticut information requests have referenced app stores, illustrating that regulators may examine the channels through which customers discover and download an app—not just the contracts listed inside it.
That kind of inquiry should not be confused with a finding of wrongdoing by an app store. Requests for information are investigative tools. They can help officials identify where an app is available, what representations customers see and which parties are involved in distribution. Whether an app store has a legal obligation in a particular case is a separate question.
What Courts Have—and Have Not—Settled
Prediction market companies have challenged state actions in court, and some have obtained preliminary injunctions. A preliminary injunction can temporarily block enforcement while a case continues, often because a judge finds that the plaintiff has shown a likelihood of success on some claims or faces harm without relief. It is not the same as a final judgment on the merits.
That distinction is essential. A company may win temporary protection in one court while another regulator continues to press its case elsewhere. Different disputes can involve different state laws, contract designs and procedural records. Even a significant ruling may answer only a narrow question, rather than establish a nationwide rule for every sports event contract.
Appeals have added to the uncertainty. Courts have not produced a settled, uniform answer across the country, and circuit-level disagreement over the reach of federal derivatives law and state gambling authority can create the conditions for a circuit split. The precise implications depend on which courts have ruled and what issues they decided. Until appellate courts—or potentially the Supreme Court—resolve the key questions, operators and regulators must navigate a patchwork of decisions.
Player Core legal framework Main point of tension State-licensed sportsbooks State sports-wagering licenses and gambling rules Whether competing sports contracts avoid rules that licensed books must follow Offshore bookmakers Often operate outside U.S. state licensing systems Whether they may lawfully accept customers in a particular U.S. jurisdiction Prediction market companies Federal derivatives law and CFTC oversight, as asserted by operators Whether sports event contracts are federally regulated derivatives, state-regulated gambling, or subject to both regimes
What to Watch Next
For customers, the practical issue is not just what a product is called. It is whether the company can serve them where they live, what protections apply, and how disputes or losses are handled. A federal registration or exchange relationship is relevant, but customers should not assume it guarantees that every sports contract is available lawfully in every state.
For the industry, the next milestones are likely to include state enforcement decisions, CFTC actions or guidance, and appellate rulings on preemption and the limits of state authority. Regulators may also continue examining the infrastructure around these products—payments, marketing, app distribution and customer access—rather than focusing only on the exchange or sportsbook.
Fact vs. Inference
- Fact: State-licensed sportsbooks operate under state rules, while prediction market companies have invoked federal derivatives law to defend certain event contracts.
- Fact: Kalshi, Crypto.com and Robinhood are among the companies associated with sports-related event contracts or their distribution.
- Fact: Regulators use tools such as cease-and-desist demands and information requests, and preliminary injunctions can temporarily restrict enforcement.
- Inference: Competition between sportsbooks and prediction markets may shape how aggressively each side argues for its preferred legal classification. That is a plausible industry incentive, not proof of any company’s motive.
- Open question: Courts have not supplied a single nationwide answer covering every sports contract, platform and state law.
The three-way fight is therefore not simply “sportsbooks versus apps.” State-licensed sportsbooks are defending a state-regulated business model; offshore bookmakers remain a distinct, often unlicensed alternative; and prediction market companies are testing whether federal derivatives law can protect sports contracts from state gambling rules. The marketing may make the products look similar. The legal hooks—and the protections customers can expect—are not.
