Prediction Markets Raise Concerns for Missouri Tax Revenue

The expansion of prediction markets in Missouri could divert significant taxable revenue from state sports wagering operations, impacting funding for state programs. This shift is occurring as legal sports betting, launched in December 2025, contributes to state coffers.

What Happened

Missouri initiated legal sports wagering in December 2025 following voter approval of Amendment 2, establishing a 10% tax on sports betting revenue to support state programs, including education, according to ABC17News.com. Concurrently, prediction markets have experienced rapid growth nationwide, presenting a potential challenge to this revenue stream.

Platforms like Kalshi and Polymarket enable users to engage in buying and selling contracts tied to event outcomes. This activity is structured as trading contracts that yield a predetermined amount based on whether an event occurs, rather than traditional sports wagers, as detailed by ABC17News.com. Dallas Short, a senior news analyst at Covers.com, noted that the pricing in prediction markets closely resembles traditional betting odds, making them nearly indistinguishable to many users.

Key Details

• Prediction market trading volume expanded from approximately $9 billion in 2024 to over $40 billion in 2025, according to the Tax Policy Center (ABC17News.com).
• In the initial week of the NFL season alone, prediction markets generated approximately $3 billion in trading volume, although this is not directly comparable to sportsbook handle (ABC17News.com).
• Prediction markets are legally structured as peer-to-peer trading, akin to stock transactions, rather than conventional sports betting, which is a key legal distinction (ABC17News.com).

Why It Matters

The distinction between prediction markets and sportsbooks is central to ongoing legal disputes and state revenue concerns. While sportsbooks operate under state gambling laws, requiring licenses and paying taxes on revenue, prediction markets contend their event contracts are financial products subject to federal regulation. This difference has significant implications for state budgets, particularly if wagering activity shifts from taxed sportsbooks to federally regulated prediction markets, as highlighted by ABC17News.com.

The Tax Policy Center cited New York as an example, where mobile sportsbooks generated approximately $2.6 billion in gross gambling revenue in fiscal year 2026, leading to about $1.3 billion in tax collections. Even small shifts in wagering activity to prediction markets could result in substantial tax revenue losses for states with large sports betting markets. For Missouri, which is in the early stages of building its sports betting tax collections, this dynamic creates uncertainty regarding future state revenue, according to ABC17News.com.

What’s Next

Lawmakers in several states are examining methods to address prediction markets, including licensing, regulation, or taxation, as reported by the Tax Policy Center. Proposals introduced in 2026, according to the National Conference of State Legislatures, range from regulatory requirements to measures that would explicitly tax prediction-market activities or classify certain contracts as sports wagering. The legal uncertainty surrounding this issue could persist for several years, with varying opinions among legal professionals on when the U.S. Supreme Court might take up a case, with estimates ranging from 2027 to 2028, according to Short via ABC17News.com. Meanwhile, ongoing court battles are anticipated across the country, with differing rulings already observed in appellate courts in Nevada and New Jersey. The outcome for states like Missouri will determine whether sports-related prediction contracts become a taxable form of wagering or remain outside state sports betting systems.

Originally reported by ABC17News.com·Published 18 Sep 2026, 00:54