A quiet shift is underway in the world of online prediction markets. Crypto.com has ceased offering its services in Arizona, marking the ninth state where these offerings have been withdrawn.
The move, effective December 2nd for sports contracts and December 12th for other prediction markets, follows a growing wave of regulatory scrutiny. Arizona now joins a list including Michigan, Maryland, Massachusetts, Illinois, New Jersey, Nevada, Ohio, and New York.
This isn’t an isolated incident. Just days ago, Arizona regulators signaled their intent to revoke Underdog’s fantasy sports license, further demonstrating a firm stance against these emerging platforms.
The core of the issue lies in a dispute over legality. State regulators contend that companies like Crypto.com are skirting the rules, effectively offering illegal sports betting without the necessary licenses.
Cease-and-desist notices and lawsuits are piling up, currently active in Maryland, Massachusetts, New Jersey, New York, Nevada, and Ohio. Crypto.com has proactively paused operations in these states while the legal battles unfold.
Sports betting itself is a heavily regulated industry, legal in 39 states, plus Washington D.C. and Puerto Rico, but requiring specific licenses and adherence to complex rules. Prediction markets, however, have emerged in a regulatory gray area.
Crypto.com, along with competitors like Robinhood and Kalshi, argues that state regulators shouldn’t have the power to override federal authority over prediction markets. Kalshi has actively sought guidance from the US Commodity Futures Trading Commission (CFTC) to navigate this complex landscape.
State bodies, however, are fiercely defending their right to regulate these markets, particularly those centered around sports events. They believe they have the authority to oversee all forms of wagering within their borders.
The conflict highlights a fundamental question: who ultimately controls the future of sports event contracts and prediction markets – state governments or federal agencies?
