DraftKings, FanDuel confirm departure from American Gaming Association

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2025/11/13: FanDuel and DraftKings exit Nevada amid prediction market crackdown 2025/09/12: Analyst: New Jersey trial a win-win for DraftKings, FanDuel 2025/07/24: DraftKings takes top spot in American Customer Satisfaction Index 2025/04/01: FanDuel and DraftKings made peace with California tribes over sports betting expansion

The Backstory

How prediction markets set up a break with the industry’s lobby

The decision by major sportsbook operators to exit the nation’s leading gaming trade group comes after months of mounting tension over prediction markets — event contracts that look like bets but fall under commodities regulation. That divergence has already reshaped how companies navigate regulators and industry allies, and it is beginning to recast competitive strategy in the biggest U.S. wagering markets. The American Gaming Association has publicly opposed prediction markets, which are overseen by the Commodity Futures Trading Commission under federal law rather than by state gaming agencies. As operators expand into those products, they are colliding with state-by-state licensing regimes, inviting scrutiny from regulators and lobbyists who argue the markets blur legal lines and threaten state oversight.

In the background, state regulators and courts have been drawing their own boundaries. The result is a patchwork of interpretations about what constitutes a wager or a swap — and whether a firm can occupy both worlds. That makes the trade-off explicit: access to prediction markets that can scale nationally under federal rules versus continued alignment with state-focused licensing and the lobbying infrastructure that supports it.

Nevada’s crackdown made the risk concrete

Nowhere did the conflict crystallize faster than in Nevada, where the regulator moved to wall off prediction market activity from the state’s gaming system. The Nevada Gaming Control Board accepted the surrender of licenses and applications tied to the two leading operators and warned that contracts linked to sports outcomes are “wagering” under state law. The action underscored that pursuing event contracts outside Nevada could imperil a company’s standing inside it. As reported in coverage of the Nevada decision, the board’s notice signaled that partnerships or associations with firms offering such contracts might affect licensing. The message: operators cannot separate their national product roadmap from their obligations to state regulators.

Nevada’s move followed similar warnings in Ohio and Michigan and came as other jurisdictions consider legislative and enforcement tools. New York lawmakers have floated new restrictions, and Massachusetts has taken a prediction platform to court. The cumulative effect is to raise the cost of testing federally regulated markets while maintaining state licenses — or to force a choice. The trade-group split fits that trajectory, enabling companies to prioritize a federal path without dragging a lobby that represents traditional state licensees into the fight.

Courts weigh the legal definition — and the competitive landscape

The stakes extend beyond licensing to legal definitions that could redraw market boundaries. A New Jersey case testing whether a federally regulated platform can offer sports-related contracts in the state highlights the uncertainty. A recent analyst note summarized oral arguments that suggested judges were receptive, in part, to the platform’s position that certain sports events could be treated as swaps under federal law. But the panel also appeared open to limiting which contracts qualify, especially player props. As detailed in the Jefferies analysis of the New Jersey appeal, the worst outcome for incumbent sportsbooks is prolonged ambiguity. Any clear ruling — even one that greenlights a narrowly defined set of contracts — reduces strategic overhang and favors scaled operators that can adjust product, marketing and compliance quickly.

That analysis underscores why some incumbents are willing to test prediction markets despite regulatory blowback. If courts ultimately set guardrails that allow a subset of event contracts, large operators can leverage compliance infrastructure and customer bases to compete effectively, while newer platforms face higher costs to acquire customers and build trust. Conversely, if states can block or tightly constrain such markets, the incumbents’ traditional sportsbooks retain a regulated moat around their core products.

Reputation and relationships factor into market access

Amid regulatory flux, consumer trust and political alliances remain critical assets. On the consumer front, one operator recently topped a national satisfaction index for igaming apps, edging rivals on mobile experience and reliability. The survey, detailed in reporting on the American Customer Satisfaction Index’s first igaming rankings, found that sportsbook users report slightly higher satisfaction than icasino players and rated app quality and navigation as key drivers. Strong app scores can cushion brand perception as companies shift product portfolios and defend against criticism that new market types are confusing or predatory.

Political capital matters just as much. In the nation’s largest untapped sports betting market, company leaders recently took a conciliatory approach with tribal governments after a bruising and unsuccessful ballot fight two years ago. Executives emphasized support for tribal sovereignty and long-term partnerships as the only viable path in the state, signaling humility after earlier missteps. The recalibration, chronicled in a session recap on making peace with California tribes, aims to rebuild trust ahead of any future push. That stance may also reassure other tribal and state stakeholders watching how operators balance growth with local control, especially as prediction markets raise new governance questions.

Legal scrutiny of marketing adds pressure

At the same time, officials are probing how sportsbooks market to consumers, an area likely to shape public and political tolerance for expansion into novel products. Baltimore recently sued two leading operators, alleging they exploited vulnerable residents through deceptive promotions and targeted outreach to problem gamblers. The complaint, summarized in coverage of the Baltimore lawsuit, claims a “two-prong” scheme that used bonus offers to drive sign-ups, then leveraged data to push further play to at-risk users. One operator said it complies with state oversight and declined to litigate in public.

Even if the case’s legal merits are contested, it feeds a broader narrative that aggressive marketing — especially in new or lightly understood product categories — invites enforcement. For companies seeking to persuade regulators that prediction markets can coexist with responsible gambling standards, a steady stream of marketing disputes complicates the case. It also gives ammunition to state agencies and lawmakers wary of ceding authority to federal regulators in a space that looks, to voters, like betting.

What’s next: a strategic fork for national operators

Together, the regulatory actions, court signals and political recalibrations explain why major sportsbooks are redrawing their alliances. Stepping back from an industry lobby that opposes prediction markets frees operators to pursue a federal lane while continuing to litigate and negotiate state by state. But the costs are real: losing a unified voice in state capitals, risking license friction where regulators view event contracts as wagers and inviting closer scrutiny of partnerships that span both regimes.

A near-term catalyst is the New Jersey appeal, which could clarify whether and how event contracts qualify as swaps. A ruling that permits a narrow set of markets would likely spur more experimentation by scaled operators, while a broad rejection would push firms to double down on traditional sportsbooks and on political alliances — such as tribal partnerships — that unlock large states under familiar rules. Either way, consumer trust, measured both by satisfaction and by compliance track records, will influence who wins as the product map evolves.

The through-line is simple: a regulatory split begets a strategic split. As companies decide which lane to emphasize, they will be judged not only by growth but by how well they navigate the responsibilities that come with it — to regulators, to partners and to customers whose confidence is the ultimate license.