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Nevada Gaming Control Board chairman Mike Dreitzer laid out a three-act scenario at an industry conference last week.
Act one: prediction market platforms offer contracts on sports events as federally regulated financial instruments.
Act two: the same legal theory that enables sports contracts gets extended to online casino-style products available nationwide.
Act three: those products migrate into physical electronic gaming terminals in bars, convenience stores, and what Dreitzer called
“prediction lounges” operating outside traditional casino frameworks, potentially on every street corner.
“Think about a ‘prediction lounge’ right next to a church,” Dreitzer said.
The reaction in some corners of the industry was skeptical and didn’t quite take Dreitzer and his take seriously. The three-act scenario
sounds like regulatory catastrophizing, a regulator defending his own turf by projecting worst-case outcomes that may never materialize.
The CFTC’s proposed rulemaking, which we have covered extensively, explicitly limits prediction market contracts to categories with legitimate
price discovery value. Slot machine-style random-outcome products do not obviously fit that framework.
Before dismissing Dreitzer’s warning, though, it is worth asking: has the gaming industry ever seen this playbook before? That’s where things get a bit interesting.
dedicated gaming facilities. Players press a button, lights flash, symbols align or do not align, and money exchanges hands in seconds.
The experience is functionally indistinguishable from a slot machine.
But HHR terminals are not classified as slot machines. They are classified as pari-mutuel wagering on pre-recorded horse races, which
places them under horse racing regulation rather than casino gaming law. That classification allowed them to proliferate in states that
do not permit traditional casino slots, including Virginia, Kentucky, and Wyoming, by threading a regulatory gap that was not designed
to accommodate them. By the time regulators and legislators caught up, HHR had generated enough revenue and enough political
support from horse racing interests to become effectively entrenched.
Video gambling terminals in Illinois operate on a similar logic. The state’s gaming statute was designed around riverboat casinos
and racetracks. VGTs exploited a provision in the Video Gaming Act to place slot-adjacent machines in bars, restaurants, and truck
stops across the state. By 2025, there were more than 49,000 VGT terminals operating in Illinois, the equivalent of more than
40 full-size casinos by machine count, in venues that were never contemplated as gaming establishments. As we have covered in
our ongoing Illinois VGT reporting, the industry has since tried to expand into Chicago, the one major market that has resisted, generating
a political fight that continues today.
Skill games in Pennsylvania, Missouri, and Georgia used a no-chance theory to operate slot-adjacent machines in convenience stores and gas stations.
Pennsylvania’s Supreme Court ultimately ruled them illegal last month after years of regulatory paralysis. Missouri’s attorney general is
currently fighting businesses that argue their pre-reveal gaming devices are different from the machines the courts have targeted. The
ight to complicate any subsequent crackdown.
Sweepstakes Casinos used a promotional currency theory to operate casino-style games nationwide without any state gaming license,
reaching an estimated one million daily users in the United States before states began restricting them. The Kentucky attorney general sued VGW,
the operator of Chumba Casino, along with Kalshi and Polymarket in a single filing last month. The products are legally distinct.
The regulatory theory animating the enforcement is the same: companies using novel legal structures to offer gambling-adjacent products without state licensing.
Nevada Gaming Control Board chairman Mike Dreitzer laid out a three-act scenario at an industry conference last week.
Act one: prediction market platforms offer contracts on sports events as federally regulated financial instruments.
Act two: the same legal theory that enables sports contracts gets extended to online casino-style products available nationwide.
Act three: those products migrate into physical electronic gaming terminals in bars, convenience stores, and what Dreitzer called
“prediction lounges” operating outside traditional casino frameworks, potentially on every street corner.
“Think about a ‘prediction lounge’ right next to a church,” Dreitzer said.
The reaction in some corners of the industry was skeptical and didn’t quite take Dreitzer and his take seriously. The three-act scenario
sounds like regulatory catastrophizing, a regulator defending his own turf by projecting worst-case outcomes that may never materialize.
The CFTC’s proposed rulemaking, which we have covered extensively, explicitly limits prediction market contracts to categories with legitimate
price discovery value. Slot machine-style random-outcome products do not obviously fit that framework.
Before dismissing Dreitzer’s warning, though, it is worth asking: has the gaming industry ever seen this playbook before? That’s where things get a bit interesting.
The Playbook in Gambling Product Progression Exists
Historical horse racing terminals, better known as HHR, look exactly like slot machines. They sit in rows on casino floors and indedicated gaming facilities. Players press a button, lights flash, symbols align or do not align, and money exchanges hands in seconds.
The experience is functionally indistinguishable from a slot machine.
But HHR terminals are not classified as slot machines. They are classified as pari-mutuel wagering on pre-recorded horse races, which
places them under horse racing regulation rather than casino gaming law. That classification allowed them to proliferate in states that
do not permit traditional casino slots, including Virginia, Kentucky, and Wyoming, by threading a regulatory gap that was not designed
to accommodate them. By the time regulators and legislators caught up, HHR had generated enough revenue and enough political
support from horse racing interests to become effectively entrenched.
Video gambling terminals in Illinois operate on a similar logic. The state’s gaming statute was designed around riverboat casinos
and racetracks. VGTs exploited a provision in the Video Gaming Act to place slot-adjacent machines in bars, restaurants, and truck
stops across the state. By 2025, there were more than 49,000 VGT terminals operating in Illinois, the equivalent of more than
40 full-size casinos by machine count, in venues that were never contemplated as gaming establishments. As we have covered in
our ongoing Illinois VGT reporting, the industry has since tried to expand into Chicago, the one major market that has resisted, generating
a political fight that continues today.
Skill games in Pennsylvania, Missouri, and Georgia used a no-chance theory to operate slot-adjacent machines in convenience stores and gas stations.
Pennsylvania’s Supreme Court ultimately ruled them illegal last month after years of regulatory paralysis. Missouri’s attorney general is
currently fighting businesses that argue their pre-reveal gaming devices are different from the machines the courts have targeted. The
ight to complicate any subsequent crackdown.
Sweepstakes Casinos used a promotional currency theory to operate casino-style games nationwide without any state gaming license,
reaching an estimated one million daily users in the United States before states began restricting them. The Kentucky attorney general sued VGW,
the operator of Chumba Casino, along with Kalshi and Polymarket in a single filing last month. The products are legally distinct.
The regulatory theory animating the enforcement is the same: companies using novel legal structures to offer gambling-adjacent products without state licensing.