MGM CEO: Prediction markets may be “cement” for federal government to enter gambling space

As Bill Hornbuckle travelled to Atlantic City this week for a prominent gaming conference, the legal sports betting industry nationwide continued to race toward a proverbial fork in the road.

Days earlier, Kalshi had reported handle of $86 million (£65 million/€75.6 million) during The Masters tournament, roughly three times the volume traded on the platform for the Super Bowl. Over the last month, Kalshi and other prediction markets have been subject to a wave of cease-and-desist orders from states around the country. The litigation comes as the US Commodity Futures Trading Commission (CFTC) prepares this month for a highly awaited roundtable on the regulatory implications of sports event contracts.

Operating tax free on trading revenues, prediction markets pose an existential threat to the regulated gaming industry in the view of some industry lobbyists. Hornbuckle, the CEO of MGM Resorts, appeared on a keynote panel at the East Coast Gaming Congress in Atlantic City on Tuesday.

“If we don’t handle this correctly, it’s going to be the cement that’s being poured for the federal government to enter the space,” Hornbuckle told iGB on the sidelines of the conference.

Federalism versus states’ rights

Nearly seven years have passed since the US Supreme Court overturned PASPA in a historic decision that essentially opened the floodgates for legal sports betting nationwide. The nation’s highest court ruled that by prohibiting states from authorising sports betting, PASPA violated the anti-commandeering rule of the 10th Amendment. Writing for the majority, Justice Samuel Alito held that the provision unequivocally “dictates what a state legislature may and may not do”.

Four conservative justices concurred, along with two members of the liberal bloc. Alito went to great lengths to explain his argument on the anti-commandeering provision. In the event that state legislative bodies were put under direct control of congress, the justice outlined a scenario in which federal officers could be installed in state legislative chambers. To buttress his argument, Alito asked if federal officers had the authority to prevent state legislators from voting on offending proposals.

“A more direct affront to state sovereignty is not easy to imagine,” the justice wrote.

Upending state laws on gambling?

As one of the world’s largest casino corporations, MGM Resorts has more than a dozen casinos in Nevada, including 10 on the Las Vegas Strip. When former Nevada governor Fred Balzar signed Assembly Bill 98 into law in 1931, the state became the first in the nation to legalise casino gambling.

Within the state, former UNLV law professor Jennifer Roberts noted after the PASPA decision that sports betting should be regarded as a traditional states’ rights issue, because gambling is “reserved to the states under the 10th Amendment”.

Years later, some take the position that prediction markets pose a threat of upending state laws established in the wake of the PASPA decision. Asked on Tuesday if the Kalshi case may set precedent on the conflict between federalism and states’ rights in gambling, Hornbuckle indicated that he prefers the latter.

“It has always been, it needs to be and continues to be a states’ rights issue,” he told iGB.

Last week, a US district court judge granted Kalshi a preliminary injunction against the Nevada Gaming Control Board. The injunction prevents the NGCB from imposing an order against Kalshi contending that the site illegally offered sports wagering across the state. 

Over the last month, Kalshi has filed lawsuits against Nevada and New Jersey in response to such cease-and-desist orders. The states “fundamentally misunderstand” prediction markets, which are regulated by the federal government, Kalshi CEO Tarek Mansour wrote on his Twitter account.

The AGA’s position on prediction markets

American Gaming Association president Bill Miller appeared on the same panel with Hornbuckle on Tuesday. Miller returned on Wednesday morning for a separate panel on the state of the gambling industry in a changing political landscape. In addressing prediction markets, Miller shared Hornbuckle’s views opposing potential intervention from the federal government.

Kalshi gained momentum during the 2024 US presidential election when users traded more than $500 million in event contracts on the election. Since then, an exercise on wagering on the election has turned into an exercise on predictions, Miller opined. In his view, event contracts on sports violate provisions of the Indian Gaming Regulatory Act and the federal Wire Act.

“For those of us who are in charge of ensuring that the public believes we are acting in a responsible manner, and we are actually in touch with the elements of responsible gaming, it’s hard for me to see this as anything other than a threat,” Miller said during the panel.

Moreover, Miller believes that prediction markets “undermine” and “upend”  decades of state regulation and statutes on gambling. In the case of New Jersey and a few others, Miller said the markets “contravene” some state constitutions, which he describes as “problematic”. While a number of companies would prefer not to undergo the “rigours” of the state licensing process, the strict requirements provide reasonable safeguards to the market, he commented.

In relation to tribal gaming, CFTC regulations on prediction markets may pre-empt agreements between sovereign nations and the states, according to Miller. Hard Rock International and Seminole Gaming CEO Jim Allen also made an appearance at the conference on Wednesday. The Seminole tribe of Florida maintains a monopoly on mobile sports wagering across its state.

“I think at this time it’s a little premature to have any definitive position on it,” Allen told iGB. “But clearly we have to have an environment where there is investigation, where there is licensing.”

A CFTC roundtable on the future of sports event contracts will take place on 30 April, according to multiple sources. The CFTC has not formally released a list of participants.