Eight years after the Supreme Court effectively opened the nation to legalized sports betting, prediction markets are creating a new regulatory battle that could reshape the gambling and financial industries, The Wall Street Journal reports. Kalshi, now the third-largest U.S. online sports betting p latform behind DraftKings and FanDuel, argues its sports contracts are financial derivatives rather than gambling and therefore should fall under federal oversight instead of state gaming laws. About 70% of Kalshi’s daily trading volume comes from sports betting, and its rapid expansion has prompted lawsuits from states and tribal governments that could face significant tax-revenue losses if bettors shift from taxed sportsbooks to prediction markets that largely do not pay gaming taxes. The stakes extend beyond sports. Prediction markets offer contracts tied to elections, Federal Reserve decisions and other events, raising broader questions about the boundary between financial markets and gambling. The gambling industry generated $17.9 billion in tax revenue for state and local governments last year, while state taxes on online sports betting range from 10% to 51% of gaming revenue.  Courts have reached conflicting conclusions over whether Kalshi’s sports contracts qualify as federally regulated swaps, with the U.S. Court of Appeals for the Third Circuit ruling in April that Kalshi’s bets were exempt from New Jersey gaming laws, while a San Francisco-based appeals panel later reached the opposite conclusion. The Trump administration and CFTC support Kalshi’s ability to offer sports bets, while some state officials and former regulators argue sports betting falls outside the CFTC’s core mission.  The Wall Street Journal has the full story. A subscription may be required. ...read more read less