'Sweepstakes gaming' faces bans in states: Here's what you need to know

Gambling Landscape: Morphing and Changing

Key Concepts: Sweepstakes gaming, daily fantasy sports (DFS), predictions markets, Commodity Futures Trading Commission (CFTC), state gambling laws, sports integrity, tax implications of gambling.

Sweepstakes Gaming

• Definition: Sweepstakes gaming involves players using virtual coins, with the option to buy in using real money, to play casino-like games and wager on sports.
• Regulation: Facing increasing scrutiny, with over a dozen states issuing cease and desist letters.
• Legislative Action: Six states have banned sweepstakes, and eleven have proposed legislation to do the same. California recently passed a bill out of committee to ban these games.

Daily Fantasy Sports (DFS)

• California Controversy: California Attorney General Rob Bonta issued an opinion deeming DFS illegal gambling.
• Governor's Disagreement: The governor disagrees with Bonta's opinion.
• Political Opposition: Congressman Ro Khanna criticized Bonta's move as "boneheaded," highlighting the popularity of fantasy sports, especially among young men.
• Industry Response: Major DFS operators like PrizePicks, Underdog, FanDuel, and DraftKings are continuing to offer DFS in California, citing the non-binding nature of the Attorney General's opinion.

Predictions Markets

• Definition: Predictions markets involve buying and selling contracts on the outcomes of events, including sports.
• Key Players: Crypto.com, Robinhood, and particularly Kalshi are actively pushing to offer trades on sports on their predictions platforms.
• Regulatory Framework: Predictions markets are regulated by the CFTC.
• Kalshi's Argument: Kalshi argues that its sports wagers are legal in every state because they are "predictions," not gambling, and that federal agency authority trumps state gambling laws.
• Legal Challenges: Federal judges in New Jersey, Nevada, and Maryland are considering the legality of these sports trades.
• Opposition: 34 state attorneys general have joined an amicus brief supporting New Jersey's efforts to prevent Kalshi from operating in the state.
• American Gaming Association's Stance: The AGA views predictions markets as an attempt to circumvent state gambling laws, potentially harming consumers and sports integrity.
• Sports Leagues' Concerns: The NBA and MLB have expressed concerns that predictions markets could compromise sports integrity.

CFTC Leadership

• Current Status: The CFTC is currently operating without a confirmed chair.
• Nominee: Christy Goldsmith Romero has been nominated to head the agency but has not yet been confirmed.
• Kalshi Advisor: Donald Trump Jr. is an advisor to Kalshi.

Tax Implications of Gambling

• Proposed Tax Law: A proposed provision in the OB would allow gamblers to deduct only 90% of their winnings, potentially leading to tax liabilities even without a net profit.
• Concerns: This provision could incentivize gamblers to use offshore gambling platforms.
• Potential Benefit for Kalshi: The proposed tax law could benefit Kalshi and similar platforms because losses on their platforms would be treated like stock trading losses, potentially offsetting gains.

Conclusion

The gambling landscape is rapidly evolving, with new forms of wagering like sweepstakes gaming, daily fantasy sports, and predictions markets challenging existing regulatory frameworks. Legal battles are ongoing at both the state and federal levels, with significant implications for consumers, sports integrity, and the future of the gambling industry. The tax implications of gambling are also under scrutiny, with proposed changes potentially impacting gambler behavior and the competitiveness of regulated platforms.