Image credit: Source: American Gaming Association / Sensor Tower and public court filings. Never imply stock depicts the actual event.
Nearly half of the digital sports betting ads Americans saw in the first two months of 2026 carried no responsible-gambling messaging at all, according to American Gaming Association data, because a growing share of them came from prediction-market platforms that don't have to include it. That compliance gap is the backdrop to a wave of lawsuits, including one filed July 28 in federal court, arguing that products like DraftKings Predictions are unlicensed sports betting wearing a different label.
Every state- and tribal-licensed sportsbook ad has to carry safer-gambling messaging as a condition of its licence. Prediction markets, regulated federally by the Commodity Futures Trading Commission rather than by any state gaming regulator, do not. AGA data compiled by the analytics firm Sensor Tower shows about 15% of digital sports betting ads lacked that messaging in 2025. In the first two months of 2026 that figure jumped to roughly 43%, as prediction-market advertising surged even while licensed operators pulled back: digital ad impressions from licensed sportsbooks fell nearly 14% in 2025, while Kalshi alone generated about 5.2 billion ad impressions in the same stretch, more than FanDuel's roughly 2.9 billion. "Confidence in your wager, and in the integrity of the games, starts with a fair and compliant betting market," AGA president and chief executive Bill Miller said. "That's why it's so important that everyone offering sports bets in the U.S. comply with state and tribal regulations, ensuring that consumers are protected."
What you don't get on a prediction-market app
If you bet through a state-licensed sportsbook, you're covered by that state's self-exclusion registry, its deposit and loss limits where required, and its rules on what an ad can promise. If you trade a sports "event contract" on a CFTC-regulated exchange instead, none of those state protections apply automatically, because the product is legally a derivative, not a wager, even when it tracks the same game and pays out the same way. That distinction is now the subject of active litigation, not just industry debate.
A proposed class action filed in Massachusetts federal court on behalf of California resident Michael Chan argues that DraftKings' Predictions product is "sports bets masquerading as event contracts," priced off the same infrastructure and sold through the same app as DraftKings' licensed sportsbook, with the CFTC label as the only real difference. Chan says he wagered and lost money on the app without being told it was operating as an unlicensed sportsbook in his state. The suit targets DraftKings' availability in eight states where sports betting itself is illegal: Alabama, California, Florida, Georgia, Minnesota, New Mexico, South Carolina and Texas. It's one of at least three such suits, with another filed separately in South Carolina.
What to check before you bet
None of this means prediction markets are a scam, and courts haven't ruled on the underlying legal question yet. It does mean the consumer protections you'd assume come standard with any sports bet may not be there. Before using a prediction-market app for sports, check three things: whether your state has legal, licensed sports betting at all (if it doesn't, ask why this product is available there); whether the platform's self-exclusion tools connect to any state program you've already enrolled in, since most don't; and whether you're treating a "trade" the same way you'd treat a bet, because the money at risk works identically either way.
The label is the whole legal fight
Every one of these lawsuits turns on the same question: does calling a wager an "event contract" change what it actually is? The CFTC has so far sided with the exchanges on jurisdiction, which is exactly what lets Kalshi and Polymarket and DraftKings Predictions keep operating in states where a licensed sportsbook could not. That federal cover is also why the ad-messaging gap exists in the first place: state regulators write the responsible-gambling rules that apply to sportsbooks, and a product that answers to the CFTC instead sits outside their reach until a court or Congress says otherwise.
Until that happens, the safest assumption for any bettor is that a prediction-market platform carries fewer guardrails than a licensed sportsbook, not more, regardless of how confidently its ads are written. The product feels identical from the app screen. The protections behind it are not, and right now that gap is a legal question still working its way through federal court, not a settled fact either side can claim.
Related: The CFTC Tells Prediction Markets to Drop Sportsbook-Style Odds | Kalshi Fights Illinois Over State Licensing and Tax | The New Federal Cap on Gambling-Loss Deductions | Massachusetts Forces Sportsbook Account Limits Into the Open