Kalshi and Polymarket run DraftKings' old loophole playbook against the sportsbooks

Fortune's headline has 35% of bettors "leaving" sportsbooks ^[18]. Fullstory's survey measured something smaller. Of the bettors it counted, 60% said prediction markets had changed how often they use sportsbooks and 35% said they use them less ^[5]. A quarter of respondents use both kinds of platform, for different events ^[13]. The sample was more than 1,000 US consumers, polled in September by a behavioral data company ^[5]. Fortune's account does not include handle or revenue figures from DraftKings or FanDuel.

The cash is easier to follow at the state level. Americans legally wagered $166.94 billion on sports in 2025 and states collected $3.71 billion in tax ^[9], about 2.2 cents on each dollar wagered ^[1]. Economist Victor Matheson told Fortune that the wagering regulators cannot see, because prediction markets are not classified as gambling, likely stands at $50 billion to $100 billion ^[8]. His range equals 30% to 60% of the legal total ^[2]. Taxed at the 2.2-cent average, it would have yielded $1.1 billion to $2.2 billion ^[3]. The American Gaming Association puts the diverted tax at more than $500 million ^[10], a floor consistent with as little as $22.5 billion of handle at the same rate ^[4].

On the facts Fortune gives, the parallel holds. The 2006 Unlawful Internet Gambling Enforcement Act barred banks from processing online betting payments but exempted fantasy sports as a game of skill ^[1]. DraftKings and FanDuel turned that exemption into same-day contests paid out all season, and for years regulators mostly let it slide ^[2]. In 2015 New York's attorney general called daily fantasy "a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country" and ordered both companies to stop taking bets from residents ^[3]. Within a couple of years most states had written daily fantasy into their gambling laws ^[4]. Kalshi and Polymarket have swapped "skill, not chance" for "commodities futures, not gambling" ^[7].

The difference is who gets to close the gap. States closed the daily-fantasy one with their own statutes. Kalshi answered Illinois's 15% tax on prediction-market sports contracts with a suit arguing the state has no authority over a federally regulated product ^[11]. Similar fights are running in Nevada, New Jersey and Maryland ^[12].

If the states win in court, prediction-market sports contracts get licensed and taxed the way daily fantasy was, and the sportsbooks' 2.2-cent cost gap goes away. If Kalshi wins, the sportsbooks keep paying a state bill their federally supervised rivals do not. A third outcome makes the tax secondary. Fullstory's respondents ranked trust and reputation (60%) and ease of use (59%) ahead of payouts or odds (51%) ^[14], and 77% said they had switched platforms over user experience alone ^[15].

In my view the 2015 parallel is accurate about the loophole and weak as a forecast of the damage, because the tax gap bears on price and price came third. Jason Wolf, Fullstory's president, made the product case. "The biggest threat prediction markets pose to sportsbooks may not be that consumers stop betting on sports," Wolf said. "It's that they reset consumers' expectations for what a betting experience should look like." ^[17] The counter-case is in the same survey: 51% still named payouts or odds, and a venue that pays no state betting tax has room to offer better prices ^[14][7]. I am wrong if legal handle and state tax receipts keep growing past their 2025 levels while the cases are open ^[9].