$1.6B Super Bowl Trading Sparks Prediction Market Debate

by Kevin Lentz, 18 February 2026

Super Bowl trading records raise regulatory and consumer questions.

Trading volume surges in prediction markets. © PIX1861, Pixabay

Key Facts:

• Super Bowl trading topped $1.6B across major prediction platforms.
• Kalshi reported more than 2,700% year-over-year growth.
• Trading volume differs significantly from sportsbook “handle”.
• Regulatory tensions continue between federal and state authorities.

Prediction markets have proven they’ve moved from a niche financial curiosity to mainstream acceptance, with industry leader Kalshi registering more than 3 million downloads in the weeks leading up to the big game. Total trading volume exceeded $1.6 billion across multiple markets.

This record-setting surge has only fanned the fires of the debate currently raging from college campuses to state capitols. It’s all about whether these tools represent a new way of financial and crowd forecasting or simply a rebranded way for people in all 50 states to bet on sports without the usual regulatory structure.

What Is It?

In its simplest form, it is a simple binary contract, a yes/no decision on a future event. Originally, it might have been something like will gold trade over $5,000 an oz at the end of February. It is priced in probability: if the contract is trading at 80 cents (yes) and 20 cents (no), then the market believes there is an 80% chance that gold will indeed trade over that amount.

Because these originally were used as event contracts, mostly in financial markets, these markets are considered derivatives and regulated by the Commodities and Futures Trading Commission (CFTC) of the Federal Government. Which was all well and good when it involved a company’s earnings or the future price of a commodity.

Once they began to morph into wagers on sports and elections, things quickly became much, much more complicated. Under the Commerce Clause, the federal government has the power to regulate interstate trade. Prediction markets include futures contracts on sports outcomes and the first song performed by the Super Bowl halftime act.

States predictably don’t see it that way and wish to use their police powers granted under the Constitution not only to regulate what they see as simple gambling markets but also to tax them.

In most jurisdictions, sportsbooks pay the state 15% to 50% of their revenue for the right to offer these bets to gamblers. Prediction markets claim to operate under federal law and above the regulations and taxes that states have imposed.

Why It Matters

One of the biggest concerns for states is that the CFTC does not regulate prediction markets like betting markets at all, but like financial investment markets. That means the markets can operate in all fifty states without the need for approval or licensing.

It also means they don’t regulate advertising to minors in the same way or hold those ads to the same responsible gaming standards as many state jurisdictions do. There are, in fact, almost zero current responsible gambling safeguards available at prediction markets, simply because the CFTC doesn’t see them as gambling operators.

Another key factor, especially on college campuses, is age requirements. Almost every state requires sports bettors to be 21; but that is not true of federally regulated financial firms, which means prediction markets have opened sports betting to those over the age of majority or 18 under federal law.

Colleges and the NCAA, which have spent decades trying to keep college-aged students and athletes safe from betting harm have been caught flatfooted.

They also lack self-exclusion tools, max bet and deposit limits and all the other safeguards that state gaming regulators have spent the last ten years building in order to mitigate addiction, as well as the much tighter Know Your Customer laws, and identification verification that states have learned must be in place to slow money laundering.

Tax revenue is another nuanced issue. Most states with legal sports betting generate tens of millions in revenue from their sportsbooks. The AGA already estimates that states have lost a combined $400 million in revenue from players switching to prediction markets.

How states and the many local community projects that have come to depend on this source of revenue will replace these funds is an ongoing discussion in capital cities around the country. Still, one unfortunate solution may be higher taxes on everyone.

Why Those Numbers Might Be Misleading?

Now that we’ve covered what these markets are and why they are so disruptive, let’s talk about those Super Bowl numbers and why they may not be what they appear. On their face, they rival the $1.76 billion believed to have been bet on the game in the regulated markets.

But sportsbook handle is a straightforward matter: total money wagered on the game. It’s one bet that either wins or loses. Trading volume is something altogether different. Let’s say I bought a contract at 60 cents for the Seahawks to win. After halftime, it has risen to 80 cents, and I sell.

Then, when New England seems to have caught a break and prices have dipped back down to seventy cents, I buy again, and so forth and so on. One trader might generate many multiples of volume.

The other takeaway is that many states with regulated sportsbooks only allow wagering on sports. No wagers on Bad Bunny’s first song or whether Cardi B makes an appearance at the halftime show. Somewhere between a third and a half of that $1.6 billion came from these cultural event contracts.

Regardless of the exact impact, the Super Bowl still signals an enormous shift in momentum towards prediction markets. And for better or worse, they have quickly become a force to be reckoned with.

States Push Back

Despite some early Supremacy Clause losses in federal courts, states continue to bring and sometimes win under the Tenth Amendment police powers and express preemption arguments. But so far, the courts have been a very mixed bag, so this is almost certainly headed towards the Supreme Court at some point.

New York’s proposed Oracle ACT is one example of how states are trying to mitigate federal largesse under new CFTC commissioner Michael Selig, who has long favoured clearing the decks of regulatory roadblocks put in place previously and allowing sports contracts to be regulated at the federal level.

Oracle would mandate a state license for anyone offering sports-related contracts, push the minimum age to 21, and apply a state tax to any revenue. Whether it’s constitutionally sound is another matter.

Many have pointed to the recent entry of old-guard sports betting operators such as DraftKings and FanDuel into prediction markets as a reason to believe markets would self-regulate or at least moderate. Still, while possible, it’s too soon to tell.

The New Normal

Prediction markets promise better price discovery, improved liquidity and the hedging of real-world risks such as rainfall in a given agricultural region or housing prices at a time when record American wealth is tied to home values. But they will also continue to disrupt in other markets, like elections and sports betting, where case law had been presumed settled for decades.

This past week has shown that they are no longer a niche market, but a parallel financial/betting system. As federal preemption continues to clash with state police powers, and Congress remains as divided as ever, the Supreme Court will likely get the final ruling on whether this multi-billion dollar market is a new stock exchange or just a very clever sportsbook in disguise.