Bank of America projects US$1.1 trillion US sports-related event contracts market

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2026/03/13: CFTC issues guidance to prediction markets on sports event contracts 2025/11/27: Bank of America warns of credit risk associated with prediction markets and sports betting 2025/01/23: Prediction market Kalshi launches event contracts on sports 2026/01/13: Federal judge blocks Tennessee’s attempt to halt Kalshi sports event contracts

The Backstory

Why the trillion-dollar call matters now

Bank of America’s projection of a US$1.1 trillion annual market for sports-related event contracts lands amid a fast-moving redefinition of what counts as betting, trading or something in between. That scale implies meaningful revenue for event-contract platforms and sportsbooks experimenting with similar products, but it also collides with an unresolved regulatory map and intensifying scrutiny of consumer risk. The market’s near-term trajectory hinges on how federal commodity rules and state gambling laws reconcile competing claims of jurisdiction — and whether platforms can keep expanding while regulators hash out boundaries.

In recent months, the Commodity Futures Trading Commission (CFTC) stepped deeper into the space. The agency has sought to signal openness to innovation while reminding exchanges that commodity rules still apply — a stance that has invited platforms to grow and emboldened states to challenge them. Meanwhile, prediction-market incumbents have pushed into headline sports contracts, betting that the combination of federal oversight, access for younger users and tax advantages can unlock national scale that traditional sportsbooks, still limited by state-by-state approvals, cannot match.

Federal guardrails take shape

The CFTC’s latest advisory to designated contract markets made clear that sports-linked contracts face heightened scrutiny where manipulation risks are concentrated, especially around single-player outcomes that resemble sportsbook prop bets. The agency’s communication — and a parallel public consultation on insider information, investor protections and sensitive markets — outlined the first contours of a framework tailored to the new products. Read more in the CFTC’s move to guide the sector in new guidance on sports event contracts.

The guidance arrived as state regulators pressed their own cases, arguing that some sports contracts are unlicensed gambling cloaked in financial language. That clash became explicit when an Ohio court found that certain sports event contracts offered by a leading platform fell under state gambling laws. The CFTC’s attempt to balance growth and enforcement has not deterred states from acting — but it has provided federally registered exchanges a legal foundation to challenge state interventions.

Platforms push into sports, testing limits

The platform at the center of the federal-vs.-state debate, Kalshi, moved decisively into sports this year, launching “will [team] win [title]” markets after filing with the CFTC. The rollout followed an earlier fight over election contracts that ended with approval and raised the profile of event trading nationally. The expansion underscored how exchange-style mechanics — standardized contracts, central clearing and federal registration — can broaden access versus geofenced sportsbooks. Details on Kalshi’s sports launch are in Kalshi’s event contracts debut.

Competition has also emerged from crypto-affiliated offerings. Crypto.com launched Super Bowl markets, then defied a CFTC request to pull them pending review. That defiance highlights the regulatory arbitrage potential and the enforcement dilemma for a federal agency that relies on registration to assert oversight. Platforms are also striking commercial alliances aimed at legitimacy and data access; Kalshi and Polymarket recently secured a multi-year partnership with the NHL, a move that could improve pricing accuracy and product depth as legal contours evolve. The broader compliance signal from leagues will influence adoption — and give regulators more to weigh as they define permissible market types.

Courts become the referees

As states assert gambling authority, federal courts are becoming de facto referees. In Tennessee, a judge temporarily blocked the state’s order that Kalshi and others halt sports-linked contracts and refund deposits, after the platform argued that CFTC registration places its operations under exclusive federal jurisdiction. The ruling did not settle the question but preserved the status quo while a preliminary injunction is considered. The dispute illustrates how quickly state-by-state enforcement can collide with a federally supervised exchange model. See the latest turn in the Tennessee injunction fight.

New York has emerged as another flashpoint. Kalshi sued the New York State Gaming Commission, claiming the agency is improperly intruding on federally regulated financial instruments by treating event contracts as wagers. The complaint, which follows similar tensions in New Jersey and clarifications in Nevada that would require a gambling license, seeks a court declaration that federal commodity law preempts state gambling enforcement for registered exchanges. The outcome could set a precedent that either accelerates nationwide expansion or fragments the market along state lines. Read more in Kalshi’s lawsuit against New York regulators.

Credit risk and consumer exposure

While platforms pitch event contracts as low-friction, federally overseen markets, banks are starting to flag second-order risks. Bank of America warned lenders that rapid-fire, gamified interfaces in prediction markets and online sportsbooks may spur impulsive, frequent trading and worsen credit outcomes, particularly among younger men and lower-income users. The bank cited research linking legal online betting to lower average credit scores, higher bankruptcy risk and more accounts in collections. That caution lands as marketing ramps up and as platforms vie for mainstream users. The analysis is detailed in Bank of America’s credit risk warning.

For exchanges, the credit debate is not just a reputational issue; it could affect payment partner relationships, capital requirements and customer onboarding standards. If lenders tighten exposure to high-frequency betting and event-trading spend, platforms may face higher processing costs, slower deposits and greater pressure to implement guardrails. For regulators, evidence of consumer harm could tilt the balance toward stricter controls on market design, especially for contracts that mimic props or enable rapid rollovers during live events.

What’s at stake for operators and investors

The legal and regulatory uncertainty is not merely procedural. It goes to the core of the business model that underpins the trillion-dollar volume thesis. If federally registered exchanges can maintain nationwide access at lower tax burdens and lower age thresholds, they hold a structural distribution edge over traditional sportsbooks. But if courts side with states or if the CFTC narrows permitted market types — for example, curbing single-player outcomes or in-play structures — the addressable market could compress, and compliance costs could rise.

Operators are racing to prove out liquidity, integrity and user protection while building alliances with leagues that can bolster data quality. States are asserting consumer protection mandates and tax prerogatives. The CFTC is sketching a framework that tries to nurture innovation without importing the very risks it warns about. Investors weighing the growth story must account for a regulatory path that remains unsettled, a consumer risk profile that could invite stricter oversight and a competitive field where product design and legal posture may matter as much as user growth curves. The next set of court rulings and CFTC clarifications will determine whether today’s projections translate into durable scale or a more constrained, state-fragmented market.