Pennsylvania’s top gaming regulator has urged Congress to address what he describes as a mounting threat to the state’s established gambling system — the rise of federally regulated prediction markets. In a letter sent on October 3, Kevin O’Toole, Executive Director of the Pennsylvania Gaming Control Board (PGCB), cautioned that these markets, operating under federal oversight, could “pose a significant threat” to the state’s tightly controlled sports wagering framework.
Pennsylvania is one of the country’s largest sports betting jurisdictions, ranking consistently among the top 10 by monthly handle and surpassing $40 billion in total wagers since the repeal of PASPA in 2018. O’Toole’s warning places the state alongside others expressing growing unease over how prediction markets — often treated as financial derivatives — could bypass state gambling laws.
“The introduction of these markets operating under purported federal oversight poses a direct threat to the comprehensive regulatory system that Pennsylvania, and many other state jurisdictions, have meticulously constructed for gaming,” O’Toole wrote.
PGCB Presses Congress and CFTC for Action
The letter, sent to Pennsylvania’s 19-member congressional delegation, asks lawmakers to press the Commodity Futures Trading Commission (CFTC) to examine the blurred boundaries between futures trading on sports event contracts and traditional sports wagering. O’Toole argued that CFTC-authorized prediction platforms, such as Kalshi, create “a direct conflict regarding regulatory authority, pitting federal derivatives law against Pennsylvania’s established power to regulate gambling activities within its borders.”
He described the CFTC’s “self-certification” approach as a backdoor form of legalization that undermines the state’s ability to enforce licensing, taxation, and responsible gaming measures. By classifying sports bets as financial instruments, these operators avoid crucial state-level requirements such as background checks, licensing fees, and integrity monitoring.
“This creates an uneven playing field where prediction markets could gain a competitive advantage by exploiting a perceived loophole between federal financial regulation and state gaming law,” O’Toole said.
Other States Issue Warnings as Legal Battles Mount
The PGCB’s move follows similar warnings from regulators in Michigan and Arizona, both of which cautioned licensed sportsbooks against associating with federally backed prediction markets. Michigan regulators have even warned that violations could result in license revocation.
Meanwhile, prediction market operator Kalshi has filed lawsuits challenging state oversight, including a case in the Southern District of Ohio against the Ohio Casino Control Commission, arguing that threats to vendor licenses unlawfully restrict its operations.
Earlier this week, industry expansion accelerated when Intercontinental Exchange, Inc. (ICE) — the parent company of the New York Stock Exchange — announced plans to invest up to $2 billion in Polymarket, valuing the platform at roughly $8 billion.
Integrity and Consumer Protection at Risk
O’Toole warned that prediction markets create confusion among consumers by appearing as legitimate, well-regulated betting systems while operating without equivalent safeguards. “Even worse, the parallel tracks risk confusing patrons who engage in these markets by utilizing the veneer of a highly-regulated market when, in reality, their markets are more akin to the ‘wild west,’” he said.
The PGCB chief emphasized that the CFTC’s oversight framework lacks the expertise and enforcement capabilities that state regulators have spent years developing. He urged federal lawmakers to reaffirm state authority over gambling and said Pennsylvania stands ready to collaborate with Congress to ensure that consumer protection and integrity remain central to sports wagering regulation.
Source:
“Pennsylvania Official Flags Prediction Markets as Threat to State Betting System”, worldcasinodirectory.com, October 9, 2025
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