Ohio gambling regulator sends 10 cease-and-desists to prediction markets

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The Backstory

Ohio’s latest move widens a fight over who regulates sports predictions

Ohio’s decision to send 10 cease-and-desist letters to prediction-market companies marks an escalation in a dispute that has been building across U.S. gambling and financial markets: whether sports event contracts are federally regulated derivatives or state-regulated sports bets. The Ohio Casino Control Commission’s action followed a Sept. 25 ruling from the U.S. Court of Appeals for the Sixth Circuit that gave the state room to apply its gambling laws to sports contracts offered by Kalshi and, by implication, other platforms using similar products.

The letters, dated Oct. 2, gave companies 14 days to pull sports event contracts from Ohio or risk penalties under state law. The regulator’s position is direct: A contract tied to the outcome of a game functions like a wager, regardless of whether it is packaged as a financial instrument. Ohio officials also have emphasized that licensed sportsbooks must follow age limits, responsible gambling rules, integrity monitoring and other safeguards that prediction platforms may not be applying in the same way.

The targets show how far the category has spread. The state named companies associated with crypto, brokerage, derivatives, fantasy sports and sports prediction products, including Coinbase, Gemini, Polymarket, Robinhood Derivatives, Underdog Predict and others. The breadth of the list reflects the central regulatory concern: sports prediction markets are no longer a niche experiment but a rapidly commercializing segment that could compete with sportsbooks without entering the state licensing framework.

A first Ohio warning became a broader enforcement campaign

Ohio’s October action did not emerge in isolation. Earlier in the year, the commission took aim at event-contract operators when it ordered Kalshi, Robinhood and Crypto.com to withdraw sports prediction products from the state. That earlier round focused on platforms offering yes-or-no contracts on events such as the Super Bowl and March Madness. The regulator said users were effectively staking money on which team would win, a product it viewed as indistinguishable from sports betting.

At the time, Ohio regulators also flagged two practical differences between licensed sports betting and event contracts. First, state law restricts sports betting to people 21 and older. Second, licensed operators are subject to Ohio-specific consumer protection and integrity rules. Prediction markets have argued that they operate under federal commodities law, but Ohio’s position is that a sports contract sold to residents remains sports gambling when the underlying event is an athletic contest.

The Sixth Circuit ruling appears to have shifted the balance from warning to enforcement. Gov. Mike DeWine said after the decision that Ohio would enforce state law against Kalshi and similar businesses, framing the products as gambling “no matter what they call themselves.” The commission’s combined cease-and-desist letters show that Ohio is now applying that view to a wider group of operators, not only the best-known early entrants.

Prediction markets are attracting major capital despite legal risk

The enforcement push comes as major gambling-adjacent and financial companies are investing in prediction markets as a growth category. IG Group’s planned purchase of Underdog is a prominent example. The London-listed derivatives trading company agreed to buy the daily fantasy sports and sports predictions platform in a deal valued at as much as $1.3 billion, aiming to expand its U.S. customer base and build around the convergence of trading, investing and entertainment.

That transaction, detailed in Complete iGaming’s report on IG Group’s acquisition of Underdog, underscored why regulators are acting now. Underdog had already moved toward prediction markets after acquiring derivatives firm Aristotle Exchange. IG said Underdog’s brand and license stack could support expansion into crypto, financial, macroeconomic, cultural and political outcomes, with sports serving as a powerful customer-acquisition channel.

The business logic is clear. Sports have high engagement, frequent events and broad mainstream appeal. Prediction contracts can be framed as simple products that resemble trading while retaining the immediacy of betting. For financial firms, they may create a pathway to introduce younger or more casual customers to broader trading products. For state gambling regulators, that same convergence raises the risk that operators will use financial-market structures to bypass sports betting laws, taxes and protections.

The inclusion of Underdog Predict among Ohio’s Oct. 2 letters illustrates that deal-making and regulatory scrutiny are now moving in parallel. Large valuations depend partly on the assumption that prediction markets can scale across the U.S. If major states treat sports event contracts as illegal gambling unless licensed, the addressable market and compliance costs could look very different.

Ohio is tightening its broader sports betting regime

Ohio’s stance on prediction markets also fits into a wider reassessment of sports betting since the state launched legal online wagering. Regulators have been moving to restrict credit-funded betting, with the commission working on rules that would ban credit card deposits for sports betting accounts. Responsible gambling advocates have backed the proposal, saying credit cards can allow customers to gamble with borrowed money and accumulate debt quickly.

The political climate has also changed. DeWine has publicly said he regrets signing the 2021 law that legalized online sports betting, citing betting scandals and concerns around proposition wagers. Some lawmakers have sought broader reforms, including proposals that would ban online sports betting altogether or tighten retail-market restrictions. While those efforts face uncertain prospects, they show that Ohio is no longer treating sports betting expansion as a settled policy question.

That context matters for prediction markets. If lawmakers and regulators already believe the licensed sports betting market has produced integrity and consumer-protection problems, they are unlikely to embrace unlicensed sports contracts as a harmless innovation. Instead, prediction markets may be seen as a parallel channel that compounds the same risks while avoiding the guardrails imposed on sportsbooks.

Other states have used cease-and-desist orders as the first line of defense

Ohio is part of a broader state enforcement pattern against online gambling products that fall outside licensed channels. Maryland regulators, for example, sent 11 cease-and-desist letters to sweepstakes operators they considered illegal. As Complete iGaming reported, the Maryland Lottery and Gaming Control Agency pursued sweepstakes platforms and payment providers after several operators failed to stop accepting customers in the state.

Florida has taken a similar approach toward offshore gambling sites. The Florida Gaming Control Commission sent cease-and-desist letters to operators including BetUS, Bovada and MyBookie, arguing that the platforms offered illegal wagers to residents. The state’s enforcement action against illegal online gaming operators in Florida reflected a familiar regulatory strategy: put companies on notice, establish jurisdiction and create a record for further action if activity continues.

Those cases are not identical to prediction markets, which raise additional questions about federal commodities law. But they show why cease-and-desist letters have become a common tool. State regulators can move faster through administrative enforcement than through new legislation, especially when digital operators can scale quickly across borders. Letters also signal to payment processors, investors and commercial partners that a product faces state-law risk.

The stakes extend beyond one state

Ohio’s action could influence how other states respond to sports event contracts, particularly if courts continue to narrow the federal preemption arguments advanced by prediction-market companies. A fragmented outcome is possible: some states may tolerate or license the products, while others force operators to exit or partner with existing sportsbook licensees. For national platforms, that would complicate product design, marketing and compliance.

The larger question is whether sports prediction markets will be absorbed into the gambling regulatory system or remain closer to financial exchanges. The answer will shape taxes, age limits, advertising rules, responsible gambling obligations and market access. It will also determine whether companies that built around federal derivatives oversight can compete directly with sportsbooks that spent heavily to secure state licenses.

For Ohio, the immediate issue is compliance within the 14-day window. For the industry, the message is broader: state regulators are prepared to test the legal boundary between trading and betting, and sports contracts are the flashpoint.