Horses, Casinos, and Prediction Markets – Old & New in Saratoga Springs

By: Michelle Cohen

Last week, I moderated a panel on the sizzling topic of prediction markets at the annual Racing and Gaming Conference at Saratoga. This conference brings together legislators, regulators, and industry professionals from a wide range of organizations in the gaming ecosphere – from horse trainers, to representatives of game suppliers and sports betting companies. It is a conference where the “old” (horse racing) and the “new” (i-Gaming and other online operations such as skill games and sweepstakes) converge.

So what’s new in the “traditional” world of horse racing?  Panelists shared insights into the challenges faced at our nation’s horse tracks, including staffing the tracks in light of changes in immigration policies. One panel focused on off-track betting as a possible means to attract further interest in some of the less attended racing venues.

One of the hottest topics was in the “older” category of brick and mortar casinos. Specifically – the ongoing application process for the New York downstate casino licenses. New York may award up to three licenses for “destination casinos” in the New York City region. Brian O’Dwyer, Chairman of the New York State Gaming Commission, indicated that eight applications had been received. He stressed that no entity is a “lock” and there are no preconceived favorites. (And less than three licenses could be awarded).  The commissions and state agencies reviewing the applications will use the “most stringent standards.” The New York Gaming Facility Location Board is supposed to determine by December 1 who should receive the licenses. Each winning bidder will be required to pay the state an upfront licensing fee of $500 million.  Could we roll the dice at a casino in Times Square? In the Bronx?  In Yonkers?  We’ll have to wait a few months to find out. Yet, it’s interesting to see such excitement focused on a traditional casino model.

Regarding the “new,” panelists addressed the newsworthy topic of prediction markets. As the moderator, I guided the audience through the maze of ongoing litigation. This includes prediction market leader Kalshi challenging cease and desist orders from Nevada, New Jersey and Maryland regulators. Kalshi asserts that the Commodity Futures Trading Commission (“CFTC) has exclusive jurisdiction over futures contracts such as those Kalshi offers involving sports predictions.  Kalshi has obtained injunction wins in Nevada and New Jersey and was denied an injunction in Maryland. This poses a potential U.S. Supreme Court showdown and a test of what Kalshi claims is CFTC’s preemptive jurisdiction. Various states and Tribes oppose Kalshi’s position.

It was an engaging discussion, with a push-pull from a free market proponent who believes sports prediction markets should be allowed and regulated exclusively by the CFTC (rather than the states), and those who contend that companies such as Kalshi are offering sports betting and should be licensed and regulated at the state level, or barred. Several key questions emerged, including whether the CFTC has the budget and staffing to oversee a sports prediction market.  We also focused on the important issue of how to address responsible gaming concerns and maintain integrity over the predictions offered. We drew comparisons between prediction market platforms and state-regulated sports betting.  Sports betting operators can only offer wagering on leagues approved by states and listed in sports betting catalogs. Further, betting on certain types of actions, such as injuries, and penalties, is explicitly barred. Will the CFTC (or the prediction markets themselves) impose similar safeguards?  It does seem like guardrails would help alleviate several of the ongoing concerns.

The highlight of the conference is, of course, the “Day at the Races,” held at the historic Saratoga race track. If you’ve never been to Saratoga, I encourage you to make the trip. While I don’t think we had any “big winners” at the track, once again the conference was a highlight of the gaming conference “circuit.” And, we gained tremendous insights about the regional and national gaming trends at “America’s Most Historic Racetrack.”