Massachusetts Gaming Commission Prohibits Sports Wagering Operators from Offering Prediction Market Contracts

The Massachusetts Gaming Commission sent an official letter to all sports wagering licensees on Thursday, making clear that offering sports-related event contracts through prediction market platforms is prohibited under state law.

The regulatory action comes as several Massachusetts-licensed operators, including FanDuel and DraftKings, have announced plans to enter the prediction market space. These platforms allow users to trade contracts on the outcomes of sporting events and other real-world occurrences, positioning themselves as federally regulated prediction markets rather than traditional sports betting operations.

Strict Interpretation of State Law

In the letter signed by Executive Director Dean Serpa, the Commission emphasized that sports wagering in Massachusetts is governed exclusively by M.G.L. c. 23N, which defines sporting events as professional or collegiate athletic events, motor races, electronic sports events, and other competitions authorized by the Commission.

"Please accept this letter as notice that you are prohibited from offering sports-related event contracts in Massachusetts, directly or via an affiliate, related business entity, or other association, or directing patrons to such event contracts being offered in Massachusetts."

The Commission made clear that wagering on sporting events may only be offered on authorized sports wagering platforms licensed by the MGC.

Consequences for Non-Compliance

The warning outlined serious potential consequences for operators that violate the directive. According to the letter, the Commission may take enforcement action up to and including license revocation against operators who offer sports-related event contracts or direct patrons to such products in Massachusetts.

The MGC also indicated that regulatory actions taken by gaming authorities in other jurisdictions could affect an operator’s suitability to maintain a license in Massachusetts. This creates additional compliance pressure for multi-state operators like DraftKings and FanDuel, both of which hold licenses in the Commonwealth.

Growing Regulatory Opposition

Massachusetts joins a growing number of states taking action against prediction market platforms offering sports-related contracts. At least eight states, including Arizona, Illinois, Michigan, Nevada, and Ohio, have issued cease-and-desist letters or warnings related to sports event contracts.

The regulatory crackdown has intensified following announcements by major sportsbook operators about their prediction market ambitions. Flutter Entertainment, FanDuel’s parent company, unveiled plans to launch FanDuel Predicts, which will offer event contracts on sports outcomes alongside financial benchmarks like the S&P 500 and cryptocurrency prices.

DraftKings, headquartered in Boston, announced in its third-quarter business update that it would enter "many states with sport event contracts" in the coming months after acquiring the CFTC-licensed Railbird platform.

Jurisdictional Conflict

The dispute centers on a fundamental disagreement about regulatory authority. Prediction market operators argue they are regulated by the Commodity Futures Trading Commission under federal commodities law and do not require state-level gaming licenses. State regulators, however, contend that contracts based on sporting event outcomes constitute sports wagering under state jurisdiction.

Massachusetts Attorney General Andrea Campbell filed a lawsuit against prediction market operator Kalshi in September, alleging the platform offers sports wagering without proper licensure or consumer protections. The lawsuit specifically noted that Kalshi allows users aged 18-21 to participate when Massachusetts law requires sports bettors to be at least 21 years old.

Kalshi and other prediction market operators have filed multiple lawsuits challenging state enforcement actions, including cases against gaming commissions in New York, Maryland, Nevada, New Jersey, and Ohio. A coalition of 34 state attorneys general filed a brief supporting New Jersey’s case against Kalshi.

Ten-Day Compliance Deadline

The Massachusetts Gaming Commission requested that all licensed operators provide a written response within ten business days, detailing the steps they will take to ensure compliance with the notice.

The letter concluded with language reserving the Commission’s right to address prediction markets and event contracts in future determinations, indicating the regulatory framework may continue to develop as the industry evolves.

Seven Category 3 licensees and three Category 1 retail casino licensees currently operate legal sports wagering in Massachusetts, which launched its regulated online sports betting market in March 2023.

Source: Massachusetts Gaming Commission