The AGA’s $1 Billion Number Is Counterfactual, But The Argument Underneath It Is Not
The American Gaming Association says prediction markets have cost states $1 billion in tax revenue. The math is a bit off, but the argument is spot on.
The American Gaming Association announced on May 28 that its running tally of state and tribal tax revenue “lost” to prediction markets had crossed $1 billion. AGA President and CEO Bill Miller delivered the figure on CNBC’s “Squawk Box,” where he also called the Commodity Futures Trading Commission a “rogue agency” and referenced the 41 state attorneys general who have formally told the CFTC it is overstepping its jurisdiction over national sportsbooks. The number is up from $500 million in February, and the AGA’s website tracker is running it in real time.
The reaction from prediction market operators was immediate and pointed. Kalshi spokesperson Elisabeth Diana called the number “fake math from casinos who are worried about losing their monopoly power.” The Coalition for Prediction Markets, which represents Kalshi, Coinbase, and Robinhood, responded on X with “Sources not found.” Both responses are fair criticisms of the narrow methodological question.
The AGA’s $1 billion figure is not audited. It is a counterfactual estimate based on the prediction-market sports handle, multiplied by the tax rates that licensed sportsbooks would have paid on the same volume. It assumes every dollar bet on a Kalshi or Polymarket sports contract would otherwise have flowed through a licensed sportsbook at the same scale. That assumption is doing a lot of work, and the actual substitution rate is almost certainly lower than 100%. Some prediction market volume is genuinely new activity that would not have existed on a sportsbook. Certainly, some of it is users in states where no legal sportsbook is available. Some of it is the kind of financial market participant who would never download FanDuel.
With all of that said, the underlying argument is harder to dismiss than the headline number.
What the AGA’s Number Is Actually Counting
The AGA’s tracker measures prediction market handle on sports-event contracts, applies state and tribal sports-betting tax rates, and adds it up. The methodology is straightforward, and the inputs are public. Where it gets soft is in the implicit assumption that the alternative to prediction market activity is sportsbook activity, dollar for dollar.
In practice, prediction markets have done two things at once. They have taken some share of activity that would otherwise have gone to licensed sportsbooks, and they have created new gambling activity that would not have existed without them. Independent analyses suggest the first effect is real. A BNP Paribas report earlier this month found that more than 50% of users of Kalshi and Polymarket also hold DraftKings accounts. That is direct evidence that the customer overlap is significant, and significant overlap means significant substitution.
The substitution rate is not 100%, but it is not trivial either. If even half of the prediction market sports volume represents activity that would otherwise have been taxed by states, the AGA’s $1 billion estimate becomes $500 million. That is still a meaningful amount of state and tribal revenue, and it continues to grow.
Why the Politics Matter More Than the Math
The more interesting story is what the AGA is actually fighting for. The trade group has spent the last seven years building the political coalition that made state-level sports betting legalization possible. That coalition was held together by the state tax revenue argument. States authorized sports betting because they would collect taxes on it. Tribes negotiated compacts because they were going to share in it. The post-PASPA legalization map was built on that promise.
Prediction markets undercut the entire framework. The same sports betting activity, routed through federal CFTC jurisdiction, generates no state tax revenue and requires no state license. The AGA’s $1 billion tracker is a political instrument designed to make that loss visible to the state officials who built the existing system. The methodological softness of the number matters less than the political work it is doing.
This is also why Miller’s “rogue agency” framing landed when it did. The day before the AGA announcement, President Trump posted on Truth Social that prediction markets should “thrive” and that CFTC jurisdiction should be protected. Miller’s CNBC appearance the next morning was an explicit pushback against that position, delivered through the most institutional voice in the gaming industry. The trade group is making a public case to an administration that has, so far, sided with the federal regulator over the state coalition.
The Timing of the Caesar’s Deal Landing on the Same Day
There is a small but worth noting bit of context regarding the timing. The AGA’s $1 billion announcement came on the same morning that Caesars Entertainment, one of the AGA’s flagship members, announced its $17.6 billion sale to Fertitta Entertainment. The day’s gaming industry headlines featured two stories: one about a multi-billion dollar consolidation, and one about the trade group’s argument that the industry is losing significant tax revenue to upstart competitors.
The juxtaposition is awkward in a way that the AGA cannot fully control. The political case for protecting licensed sports betting depends in part on framing the industry as a state revenue partner under pressure from federally regulated outsiders. The same day the case crosses the $1 billion mark, the country’s largest casino operator gets acquired in one of the most expensive private deals in gaming history. Both things can be true simultaneously, but the tonal mismatch is real, and prediction market operators will use it.
What the $1 Billion Means in Practice
For the underlying policy question, the AGA’s tracker is a useful annoyance that sheds light on the issue, regardless of its precision. Prediction markets are taking real volume from licensed sportsbooks. State and tribal tax revenue is being affected; both of those points are undeniable. The exact dollar figure is contested and probably inflated, but the direction is not in dispute.
The question now is what the political response looks like. The 41 state attorneys general have written to the CFTC. The AGA is putting up a $1 billion counter. Trump has publicly defended the CFTC’s role. The state-by-state lawsuits against Kalshi and Polymarket continue. The CFTC is suing Minnesota to block one of those state bans. The federal-state collision over prediction markets is the central regulatory fight in American gambling, and the AGA’s $1 billion is one more piece of pressure in a confrontation that will be resolved by courts, Congress, or the administration before it is resolved by voluntary agreement.
The number on the counter is soft, the ensuing fight is anything but.
Players trust our reporting due to our commitment to unbiased and professional evaluations of the iGaming sector. We track hundreds of platforms and industry updates daily to ensure our news feed and leaderboards reflect the most recent market shifts. With nearly two decades of experience within iGaming, our team provides a wealth of expert knowledge. This long-standing expertise enables us to deliver thorough, reliable news and guidance to our readers.
Latest News
