Sports betting platforms are pushing for a fundamental shift in how the industry is regulated, with two firms arguing at Consensus Miami 2026 that sports event contracts should be classified as financial products rather than gambling instruments.
Market Context
The U.S. sports betting market operates under a patchwork of state-by-state casino licenses, creating significant compliance burdens and limiting market efficiency. Prediction markets like Kalshi have already faced legal battles with the Commodity Futures Trading Commission over whether event-based contracts fall under federal financial oversight or state gambling law. The debate has intensified as platforms seek clearer pathways to operate nationwide without navigating 50 separate regulatory regimes.
Analysis
Jacob Fortinsky, co-founder and CEO of Novig, framed sports betting's current structure as fundamentally flawed. "Sports betting is really the only industry in the country that regularly limits and bans their power users," he said at the conference. His company characterizes sports event contracts as binary financial instruments that have been misclassified for decades. Fortinsky pointed to a $2 trillion global market still dominated by legacy casino operators who treat successful bettors as threats rather than legitimate participants.
Adam Mastrelli, founder of 57 Maiden—which develops AI-driven trading strategies for prediction markets—offered firsthand validation of the structural problems. He told conference attendees that his team was banned from two major sportsbooks within two months for being "sharp," drawing a comparison to "LeBron James getting kicked out of the NBA for being too good." Mastrelli said the experience drove him to Novig, which operates without fees and allows traders to create synthetic positions.
Fortinsky revealed that an earlier attempt to secure state-level regulation in Colorado proved instructive. "Regulators told us essentially you're naive if you think we care about consumer protection or innovation or market efficiency," he recounted. "We really just care about our tax revenue." That experience led Novig to pursue a federal Designated Contract Market framework, which would preempt state gambling laws and allow operation across all 50 states.
Key Numbers
- $2 trillion: Estimated size of the global sports betting asset class
- 35 states where Novig currently operates under a sweepstakes model
- 154 trading strategies tested by 57 Maiden; only three currently running profitably
- 15 pending lawsuits involving the CFTC, Kalshi, Robinhood and various states over jurisdictional questions
What to Watch
Novig is targeting a summer transition from its current sweepstakes framework to full federal DCM status, which would dramatically expand its addressable market. Fortinsky predicted the federal-state regulatory battle will reach the Supreme Court within two to three years given the volume of litigation already in motion. Mastrelli noted that political and event-driven prediction contracts present greater insider-trading risks than sports markets, potentially making athletics a safer entry point for regulatory clarity. Traders should monitor whether Congress advances any market structure legislation that could codify federal oversight of event-based financial instruments.