AGA Report Details Over $1 Billion in Tax Revenue Losses from Prediction Markets Operating Outside State Oversight

The American Gaming Association has released findings indicating that states and Native American tribes have lost more than $1 billion in tax revenue because prediction markets have operated beyond established regulatory frameworks, and these federally overseen yes/no exchanges continue to capture activity that would otherwise flow through state and tribal systems.

Data from the group shows the lost revenue figure climbing in real time through a dedicated tracking tool, while the underlying activity centers on event contracts that draw substantial participation in sports-related derivatives, and recent figures from the Pew Research Center place that category at 80 percent of total volume on platforms such as Kalshi between July 2024 and April 2026.

Tracking the Revenue Shortfall in Real Time

Officials at the American Gaming Association compiled the loss estimates by comparing projected tax collections from regulated gaming against actual figures recorded after prediction markets expanded their reach, and the resulting gap exceeds $1 billion with the total continuing to rise as additional contracts settle. The organization maintains a live tracker that updates the cumulative amount as new data becomes available, allowing policymakers and tribal representatives to monitor the ongoing impact without delay.

Because these markets function under federal commodity rules rather than state or tribal licensing structures, the revenue that would support community projects, infrastructure, and public services has instead remained outside those collection systems, and the scale of the shift has prompted multiple jurisdictions to examine their existing statutes.

State and Tribal Responses Through Litigation and Legislation

States have initiated legal actions against certain prediction market operators while simultaneously advancing new tax measures designed to bring such activity under local oversight, and tribal governments have joined these efforts where their gaming compacts are affected. Lawmakers in several jurisdictions have introduced bills that would impose excise taxes or licensing requirements on platforms that offer event contracts to residents, and court filings argue that the current federal framework creates an uneven competitive environment that disadvantages regulated operators.

These responses reflect the broader pattern in which states seek to recapture revenue streams that have moved to exchanges operating under different regulatory assumptions, and the combination of lawsuits and proposed statutes represents the primary tools currently in use.

Sports Derivatives Driving Platform Volume

Pew Research Center analysis of trading data from July 2024 through April 2026 found that sports derivatives accounted for 80 percent of activity on major platforms including Kalshi, and this concentration has amplified the revenue effects because sports betting represents one of the largest taxable categories within state and tribal gaming portfolios. The high share of sports-related contracts means the diversion of activity produces measurable shortfalls in areas where states already collect significant percentages of handle or revenue.

Observers tracking the sector note that the volume concentration has remained consistent across multiple reporting periods, and the resulting tax gap has widened as more participants migrate to the federally regulated venues for those specific contract types.

Implications for Community Funding and Regulatory Balance

The lost revenue directly reduces funds available for state programs and tribal community initiatives because gaming taxes traditionally support education, health services, and local infrastructure, and the American Gaming Association report underscores how the current structure channels those dollars elsewhere. As the live tracker continues to register increases, the cumulative impact grows each time additional contracts reach settlement without passing through regulated channels.

Policy discussions in May 2026 have centered on whether adjustments to federal or state rules could realign the oversight structure, while litigation proceeds in parallel to test the boundaries of existing authority over event contracts offered to state residents.

Conclusion

The American Gaming Association findings provide a quantified view of revenue displacement tied to prediction markets that sit outside state and tribal regulatory reach, and the combination of real-time tracking, Pew volume data, and active litigation illustrates the ongoing adjustments within the sector. States and tribes continue to pursue both judicial and legislative avenues as the tracked total moves beyond the initial $1 billion threshold.