by Prof. Jay Zagorsky
The National Hockey League or NHL recently concluded multiyear deals with prediction market companies Kalshi and Polymarket. These partnerships make the NHL the first major U.S. professional sports league to work with prediction markets.
Prediction markets are where individuals can bet on the outcomes of various unknown events. These events can range from sporting events, political election results to economic outcomes. Prediction markets have created a new forecasting method which shows what many people anticipate by allowing them to gamble on what will happen in the future.
Given it was already possible to gamble on professional hockey in places like Massachusetts, why did the NHL conclude these new deals? The simple answer is that prediction markets allow users in all 50 U.S. states to trade on outcomes, like who will win the NHL’s ultimate trophy, the Stanley Cup.
Being allowed in all states is important because while sports betting is legal in three-quarters of US states, it is illegal in some of the biggest states like California and Texas. By signing this deal the NHL bypassed legislators and citizens reluctant to authorize gambling and allowed fans everywhere in the US to bet on hockey.
Should anyone really care whether a sports bet is placed with sportsbooks like DraftKings or FanDuel or if the bet is made with prediction markets like Kalshi or Polymarket? The answer is yes! There is a lot of money riding on whether people bet using sportsbooks or prediction markets. Before I explain why, let’s look at how sports gambling evolved in the US.
A short history of sports gambling
Betting on sports before 2018 was illegal almost everywhere in the US except Nevada. The federal Professional and Amateur Sports Protection Act or PASPA made it illegal to bet on sports outside of Nevada. This forced gamblers to either bet with a bookie or use an off-shore site. This was a relatively risky process since bookies were sometimes arrested, and off-shore websites could be shut down.
In 2018 the U.S. Supreme Court heard the case of Murphy v. National Collegiate Athletic Association. Philip Murphy was then the governor of New Jersey, a state which already had casino gambling in Atlantic City. Murphy wanted to give gamblers the ability to make bets beyond traditional games like blackjack and craps. The Supreme Court agreed with Murphy and struck down PASPA in a 6 to 3 ruling. This gave individual states the power to decide whether to legalize sports betting inside their borders.
Many states rushed to take advantage of the rule change because it provided them with a new source of tax revenue. As of today there are 39 states that allow some form of sports gambling. The forms of gambling allowed vary quite widely. In some states, like Montana and Nebraska, only in-person sport betting is allowed. In other states, like Wisconsin, bets can only be made when a person is on Indian tribal land. Some states, like Massachusetts, allow both online and in-person betting to happen anywhere in the state.
States also restrict gambling based on age. In Massachusetts you have to be at least 21. However, in neighboring Rhode Island 18 year olds can make sports bets.
No matter the form it takes, billions of dollars are wagered on sports each year. For example in the third quarter of 2025, which tracks July through September, the American Gaming Association estimates about $33 billion was bet on sports. That is almost a billion dollars bet in each state where gambling is allowed in a three month period!
On average over 90% of all money bet in a sportsbook goes back to winning gamblers. The other part is kept and split between gambling operators and the states. The states’ share has become an important source of tax revenue. for example, Massachusetts collected $30 million in taxes from sports gamblers during the third quarter of 2025 and over $340 million in taxes since sports gambling started less than three years ago!
While it is clear why states like gambling, there are also big benefits for professional sports leagues, like the NHL. Gambling boosts fan engagement. People betting money on a game or a player stick around and continue to watch even when the game’s score isn’t close. Advertisers pay for eyeballs so the longer people watch, the more money advertisers are willing to pay.
Hockey, however, doesn’t get as much fan engagement from gambling as other sports because relatively little is bet on hockey. Data on bets broken down by type of sports is available for Nevada. Last year, two-thirds of all bets were made on either football or basketball. Hockey’s share was just 5%. Allowing people to bet via prediction markets is an attempt by the NHL to boost engagement among gamblers.
Why is the NHL Move a Problem?
The NHL’s move enabling prediction markets to offer hockey bets puts state tax revenue from gambling at risk. Prediction markets are regulated at the federal level by the Commodity Futures Trading Commission (CFTC). Futures markets serve a useful purpose in business by spreading risk beyond the farmer or producer, and are not taxed.
Because prediction markets are covered by the same rules that govern oil and wheat futures contracts, prediction markets are not taxed. This means as prediction markets take market share away from traditional sports gambling companies, state tax revenues from gambling will plummet.
Also, prediction markets operate outside of state control, bypassing gaming regulations like Montana and Nebraska’s rules that all sports betting is done in-person, age restrictions like in Massachusetts and blanket prohibitions like those currently in California and Texas.
The differences in regulation reflect how prediction markets and sports betting are set up. Prediction markets are designed to be like a stock market, where people buy and sell shares. These shares track if an outcome will or will not happen, like if the Boston Bruins will win a particular game. Sports betting is set up more like casinos, where the house has the ability to both set and influence the odds or chances something will happen. This leads to some minor variations like in prediction markets a gambler can sell their bet before the outcome is decided, while in a sportsbook they cannot.
However, in my mind these variations are not large enough to have two totally different types of regulatory rules; one federal and one state. Instead, there should be one level playing field.
In 2018 the Supreme Court gave individual states the power to decide whether to legalize sports betting inside their borders and if it was legalized, how it should be done. The NHL’s move circumvents both the Supreme Court and state lawmakers’ wishes. In my mind prediction markets should be barred from allowing any sports wagers. Hockey has clear rules ensuring no one has an unfair advantage on the ice. We shouldn’t allow the league to ignore the clear rules surrounding sports gambling laid out by the Supreme Court.
