Prediction Markets Drain Over $1 Billion in Tax Revenue from States and Tribes According to AGA Data

The American Gaming Association has released figures showing that states and Native American tribes have lost more than $1 billion in tax revenue because prediction markets operate outside established state and tribal regulatory systems, and these federally regulated yes/no exchanges continue to pull in activity that would otherwise contribute to public funds for community projects. A live tracker maintained by the group displays the total climbing in real time as trading volume grows across platforms. Observers note that the lost revenue stems from contracts tied to sports events and other outcomes, which bypass the licensing and taxation structures that apply to traditional gaming operations. States have begun filing lawsuits and drafting new legislation aimed at capturing taxes from these activities, while the volume data reveals heavy concentration in sports derivatives. According to Pew Research Center analysis covering July 2024 through April 2026, sports derivatives accounted for 80 percent of trading volume on major platforms including Kalshi.

Scale of Revenue Loss and Live Tracking

Figures released by the American Gaming Association place the cumulative shortfall above the $1 billion mark, with the amount continuing to rise as platforms handle additional contracts. The live tracker at the AGA site updates continuously and allows users to monitor how individual states and tribes experience the shortfall as trading occurs outside regulated channels. This mechanism highlights daily and weekly increments tied directly to the volume flowing through yes/no exchanges that fall under federal oversight rather than state or tribal jurisdiction.

Those who track gaming policy point out that the absence of state-level taxation on these contracts means funds that might support education, infrastructure, or tribal community services remain uncollected. The tracker connects each increment in lost revenue to specific categories of event contracts, showing how sports-related activity drives the largest share of the gap. Because the exchanges operate nationally under federal rules, individual jurisdictions lack direct authority to impose the same fees that apply to licensed casinos and sportsbooks within their borders.

Pew Research Findings on Trading Volume

Data compiled by the Pew Research Center documents the dominance of sports derivatives within the overall market from mid-2024 into early 2026. During that period the 80 percent share of volume attributed to sports contracts underscores why states with established sports betting frameworks view the shift as particularly costly. The report breaks down activity across major platforms and shows consistent patterns where event contracts linked to professional and college sports generate the bulk of trades.

Researchers who examined the dataset found that the concentration in sports derivatives aligns with broader interest in outcome-based trading, yet the structure keeps these trades outside the tax collection systems used for regulated sports wagering. This separation creates the measurable revenue difference tracked by teh American Gaming Association. The Pew numbers provide context for why litigation has focused on reclassifying or taxing certain contracts at the state level.

State and Tribal Responses Through Litigation and Legislation

Multiple states have initiated legal actions seeking to bring prediction market activity under existing tax frameworks or to establish new ones. Legislatures in several jurisdictions have introduced bills that would require platforms to collect and remit taxes similar to those paid by licensed operators. Tribal governments have joined these efforts because the lost revenue affects programs funded through gaming compacts and related agreements.

Attorneys representing state gaming commissions argue that the federal structure of the exchanges creates an uneven playing field, and court filings cite specific examples of volume that would have been subject to state taxation if conducted through regulated channels. Proposed legislation often includes provisions for data sharing so regulators can verify volumes and assess appropriate fees. These measures aim to close the gap documented in the AGA tracker without disrupting the federally permitted operation of the platforms themselves.

Current Context in Mid-2026

As of May 2026 the live tracker continues to register incremental losses each week, reflecting ongoing trading activity. State attorneys general offices report that several cases remain active in federal courts while legislative committees hold hearings on new tax language. The combination of litigation and statute drafting represents parallel tracks that jurisdictions are pursuing to address the revenue shift.

Native American tribes have coordinated through national organizations to emphasize how the shortfall affects tribal services that rely on gaming revenue. Discussions at the federal level have touched on whether additional guidance could clarify tax responsibilities without altering the core regulatory status of the exchanges. The AGA continues to publish updated totals that tie directly to the volume metrics released by the Pew Research Center earlier in the year.

Conclusion

The American Gaming Association report and the accompanying live tracker establish a clear record of more than $1 billion in foregone tax revenue for states and tribes as prediction markets handle contracts outside traditional regulatory systems. Pew Research Center data confirms the heavy weighting toward sports derivatives through April 2026, and ongoing litigation plus proposed legislation show how jurisdictions are responding to the trend. The situation continues to develop as volumes update and legal actions proceed.