Why prediction markets might take a bite out of New York's tax revenue
New York state officials are concerned that the rise of prediction markets like Polymarket and Kalshi could erode tax revenue from mobile sports betting. Because these platforms are taxed differently than traditional sportsbooks, the state faces potential multi-million dollar losses.
Why it matters
It illustrates the regulatory and fiscal challenges states face as new financial technology platforms blur the lines between gambling and derivatives trading.
DragonImages/Getty Images Mobile sports betting has become New York's second-largest driver of gambling revenue. The rise of prediction markets, which aren't taxed the same in the state, could be a revenue hit. More problem gamblers and gamblers turning to prediction markets could cause financial strain. New York has turned mobile sports betting via apps like DraftKings and FanDuel into a lucrative source of state revenue. This raises a question for lawmakers and state finances: Can platforms that offer sports-related contracts compete with sportbooks — and avoid the state's 51% tax rate? In the first quarter of 2026, mobile sports betting brought in around $328 million in tax receipts for the state, according to a report from the state comptroller's office. Nationwide, New York accounts for a third of all state tax collections on sports betting revenues.
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