Where the map is being redrawn
The state-by-state framework described in this course was built for products that sit still: a sportsbook licensed in a state, a casino app that works within its borders. The products that have grown fastest since 2023 do not sit still. Sweepstakes casinos offer slots in states with no online casino law; prediction markets offer sports contracts in states with no sports betting law; daily fantasy pick'em products offer something that looks like player props under the fantasy exemption; and skill-game machines fill convenience stores under the argument that they are not gambling at all. Each exploits a boundary in the framework, each has drawn a state response, and one of them has become a federal constitutional fight. This lesson covers the four frontiers and the federal proposals that hover over all of them.
Sweepstakes casinos
The sweepstakes model separates the purchase from the prize. A customer buys "gold coins" that have no cash value and receives "sweeps coins" free with the purchase (and by mail-in request, which is the legal fig leaf); sweeps coins are played on casino games and can be redeemed for cash prizes. Because no purchase is necessary to obtain sweeps coins, the operator argues that the cash-prize element is a sweepstakes promotion, lawful under state promotional law, rather than gambling, which requires consideration. The model grew from social casino roots into a sector that a Macquarie analyst put at about $4 billion in December 2024, offered in dozens of states while real-money online casino is legal in only seven.
The reaction came in 2025. State attorneys general and regulators issued cease-and-desist orders; class actions alleging illegal gambling multiplied; and legislatures moved to prohibit the model expressly, with Montana, Connecticut, New Jersey, California and New York enacting express bans in 2025, Nevada widening enforcement powers against unlicensed operators without expressly banning sweepstakes, and Indiana and other states following in 2026. Operators, most notably VGW, withdrew from several of the banning states, the Social and Promotional Games Association has argued for clear regulation rather than prohibition, and the states with legal online casino have been among the most hostile, since sweepstakes compete with licensed, taxed products. The Sweepstakes and Social Casino course covers the model in detail; for regulation, the trajectory is clear: a product that existed in a gap is being legislated out of it, state by state, and a licensed sweepstakes regime has not emerged anywhere.
Prediction markets
Event contracts are binary derivatives: a contract that pays one dollar if an event occurs and nothing if it does not, traded on an exchange at prices that express probability. Registered with the Commodity Futures Trading Commission as designated contract markets, exchanges listed contracts on economic data, then on elections (after a federal district court ruled for Kalshi against the CFTC in September 2024), and from December 2024 on sporting events: who wins a game, a championship, a tournament. Because the CFTC has exclusive jurisdiction over derivatives on registered exchanges, the exchanges argue that state gambling law is preempted: a sports contract on a federal exchange is available in all fifty states, including the ones that never legalised sports betting, with no state licence, no state tax and no tethering.
States, tribes and the licensed industry disagree, and the fight has moved through every forum. State regulators, starting with New Jersey and Nevada in early 2025, sent cease-and-desist letters; Massachusetts's attorney general sued Kalshi in September 2025 and Arizona brought criminal charges; the exchanges sued for injunctions in Nevada, New Jersey, Maryland, Ohio and elsewhere; district courts split; and the appellate courts have now split too. The Third Circuit held in April 2026, by two votes to one, that Kalshi was likely to show that sports event contracts are swaps within the CFTC's exclusive jurisdiction and that New Jersey's gambling laws are preempted. The Ninth Circuit held in August 2026, in the Nevada case, the opposite: such contracts are likely not swaps, so Kalshi had not shown that federal law displaces Nevada's gaming laws. The Sixth Circuit agreed with the Ninth in September 2026, in cases from Ohio and Tennessee, holding that the contracts are likely not swaps and that the Commodity Exchange Act would not preempt state gambling law even if they were. New Jersey petitioned the Supreme Court on 2 September 2026, Crypto.com and Robinhood filed their own petitions later that month (Robinhood's, against Nevada, is No. 26-338), and the question is likely to be decided there. Meanwhile, in a suit brought by the CFTC and the Department of Justice, a federal court in Arizona enjoined that state in May 2026 from enforcing its gambling laws against contracts on registered exchanges, and a Massachusetts state court granted the attorney general a preliminary injunction against Kalshi in January 2026 in the state's own suit.
The CFTC's position has itself moved: from proposing in May 2024 to prohibit contracts on sports and elections, to withdrawing that proposal in February 2026, to proposing in June 2026 a framework of public-interest determinations that would largely permit contracts on sporting outcomes while treating some designs as likely contrary to the public interest (for example, contracts on player injuries, officiating decisions, altercations and pre-collegiate sport). On 9 October 2026 it went further, proposing to define "swap" expressly to include event contracts on sports, politics, culture and weather, and issuing an interim final rule that excludes casino-style gambling, including sportsbook wagers and casino games, from the definition. Tribes are among the most determined opponents, with tribes in California, Wisconsin and New Mexico suing Kalshi and Robinhood, because a federal instrument bypasses the exclusivity their compacts bought. The Prediction Markets course covers the product and the market; for regulation, the outcome will determine whether the state-by-state framework for sports betting survives or whether a federal channel runs alongside it.
Daily fantasy pick'em and skill games
Daily fantasy sports operated under UIGEA's fantasy exemption and state fantasy laws for a decade, but the "pick'em" format that grew after 2020 (choose whether several players will go over or under a statistical line, against the house) looks like a parlay of player props, and state regulators said so: Wyoming, Michigan, New York and Florida, among others, ordered the products withdrawn or restructured in 2023 and 2024 (in Florida Betr, Underdog Fantasy and PrizePicks stopped offering them from 1 March 2024, and Ohio officials also challenged them), and operators moved to peer-to-peer formats or to sportsbook licences where available. The line between fantasy and betting is drawn by each state and is still moving.
Skill-game machines (terminals offering games with a nominal skill element, placed in bars and convenience stores) are a land-based frontier with online implications: Pennsylvania's courts ruled on their legality repeatedly until the state Supreme Court held in June 2026 that they are slot machines under the Gaming Act and the Crimes Code, with a 120-day stay to give the legislature time to act; the court refused to extend the stay on 9 October 2026, so without new legislation the machines became unlawful to operate from mid-October; Virginia allowed them for a period in 2020 and 2021 and then banned them, and in April 2026 its governor vetoed a bill to legalise them; and the industry's argument that skill takes a game outside gambling law is the same argument that fantasy operators and, in India, real-money gaming operators made. The skill-versus-chance boundary is the oldest in gambling law and is being litigated in every new form.
Federal proposals
Congress has not passed a law regulating gambling operations since UIGEA in 2006, and the proposals of the 2020s show the shape of what might come. The SAFE Bet Act, introduced in September 2024 and reintroduced in March 2025, would make sports betting lawful only in states whose programmes the Attorney General approves against federal minimum standards: advertising restrictions, affordability checks, a ban on in-play betting once an event has started, and a bar on using artificial intelligence to track bettors or target offers; it has not advanced. Proposals to repeal the federal excise tax on wagers recur, most recently the Discriminatory Gaming Tax Repeal Act of 2025. Bills to prohibit sports contracts on prediction markets have been introduced, including the bipartisan Prediction Markets Are Gambling Act in the Senate in March 2026 and in the House in July 2026. And the 2025 tax legislation's limitation of gambling loss deductions to 90 per cent from the 2026 tax year produced a bipartisan repeal effort; the House Ways and Means Committee voted in September 2026 to restore the full deduction, but the change had not been enacted as at September 2026.
The constitutional constraint from Murphy v NCAA runs through all of them: Congress may regulate sports betting directly, may attach conditions to federal law, and may preempt state law, but may not order states what to do. A federal framework, if one ever comes, will be a federal licence or federal standards, not a federal instruction to the states.
What it means for operators
An operator in the American market now plans for three regulatory tracks. The state track: licences, tethering, tax and compliance in the states that have legalised, as the earlier lessons describe. The federal track: a possible national channel for sports contracts under the CFTC, for which the largest online sportsbooks have positioned: DraftKings acquired Railbird, a CFTC-designated exchange, in October 2025 and FanDuel launched a predictions product with CME Group, while casino-led operators such as Caesars, MGM and Penn have so far held back. And the boundary track: sweepstakes, fantasy and skill products that exist in gaps and are being closed, which a licensed operator avoids and monitors. The tribes sit across all three as counterparties, competitors and litigants.
What to take from this lesson
The fast-growing products of the 2020s live at the framework's boundaries. Sweepstakes casinos are being prohibited state by state after 2025. Prediction markets' sports contracts have split the circuit courts (Third Circuit for federal preemption in April 2026, Ninth and Sixth Circuits against in August and September 2026) and are headed for the Supreme Court, with the CFTC proposing a permissive framework and, in October 2026, a rule defining event contracts as swaps, and tribes among the leading opponents. Fantasy pick'em products were pushed out of several states as disguised props, and skill games test the oldest boundary in gambling law. Federal proposals (minimum standards, excise repeal, prediction-market bills, loss-deduction repeal) have not passed, and Murphy limits any federal framework to regulation and preemption rather than commands to states.