US Congress · New York · Fortune Technology
35% of bettors are departing sportsbooks for prediction markets, echoing the regulatory loophole DraftKings created its
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In 2006 Congress passed a law called the Unlawful Internet Gambling Enforcement Act, which didn’t ban online betting but rather, banned banks from processing payments for it.
Key facts
- Americans legally wagered $166.94 billion on sports in 2025, generating $3.71 billion in state tax revenue
- Economist Victor Matheson told Fortune the market likely stands at $50 billion to $100 billion, which is invisible to state regulators because prediction markets aren’t classified as gambling
- The American Gaming Association estimates prediction markets have diverted more than $500 million in potential sports-betting tax revenue away from states
- In 2006 Congress passed a law called the Unlawful Internet Gambling Enforcement Act, which didn’t ban online betting but rather, banned banks from processing payments for it
Summary
And in 2006 “fantasy sports” meant a season-long league with your friends, like how you draft a team in August and watch it all year, and ultimately have a ridiculous challenge for the loser at the end. Then in 2015 New York’s attorney general argued daily fantasy sports had started looking less like a game of skill and more like ordinary sports betting, calling it “a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country, ” and ordered both companies to stop taking bets from state residents. Now, DraftKings and FanDuel are having to deal with a new industry using a similar loophole: prediction markets. Americans’ true sports-wagering habit likely exceeds official figures by tens of billions of dollars once prediction markets are included.