Are Prediction Markets A Threat To Horse Racing?

[Wandering Eyes]

So-called prediction markets have become all the rage across a wide swath of topics, from election results to gas prices to the amount of snowfall might occur in a given place.

The Kentucky Derby and horse racing at large? That topic was the subject of a panel entitled 'Prediction Markets and Wagering: An Emerging Threat To Horse Racing and Interstate Horseracing Act Revenue' during Thursday's session of the National HBPA Conference at Oaklawn Park.

Speakers agreed that prediction markets have the ability to dwarf even sports betting in America. The prediction-market platform Kalshi reportedly took in more than $500 million in trading volume on the Super Bowl. Bloomberg has reported that Polymarket took in $529 million on the timing of U.S. strikes in Iran. And Polymarket reportedly took in $1.2 million overseas on the 2025 Derby.

Prediction markets, which are not subjected to state gaming taxes and do not have the consumer protections built into state regulation, say that they offer something akin to futures contracts. They insist this does not constitute a wager and the danger to horse racing is real, experts agree.

“I think that the prediction market is a real threat to the horse-racing industry unless we handle it correctly,” said Dennis Drazin, the chairman and CEO of Darby Developments, which operates Monmouth Park.

So pervasive are the prediction markets that FanDuel and DraftKings have jumped in. But Churchill Downs has suggested court involvement should prediction markets try to offer contracts on the Derby. Horse racing's cause is aided by the Interstate Horseracing Act of 1978, which gives horsemen the right of approval or refusal to have their betting signal sent across state lines.

According to panelists, there are better than 60 lawsuits pending and the consensus is that the issue will advance all the way to the U.S. Supreme Court, a final decision years down the road.

“I think we have a very strong case, because we have federal laws that control this,” said Drazin, joining the panel via Zoom. “It's not something that's trying to create state law. And I think as things go on, this has been a very important week.

“There were two very important decisions by the federal court saying that, basically, the prediction market does not preempt state law, and they dismissed those cases and sent them back to the state court. So I think certainly there's a lot to be said and a lot to be litigated.”

Drazin said a class-action suit would be the optimal means of pursuing a remedy.

“We need to be prepared to decide how we're going to deal with this,” said Drazin. “My recommendation is that those of us who want to participate, we head to the federal court and assert our rights under the Interstate Horseracing Act. But the industry is going to have to make some decisions.”

But Jason Johnston, the sportsbook manager for WarHorse Gaming in Nebraska, is of the opinion that peacefully coexisting might be the way forward for the racing industry.

“If there's not a hard block, they [prediction markets]'re going to swing for the fences, and it's going to escalate fast,” Johnston said. “Just look at how much Kalshi has changed over the last nine months from a consumer experience.

“The other backup plan would be get ahead of it, try to find a partnership with it and get a piece of the pie. Because I think Kalshi and Polymarket are just going to try to run through everybody and just get what they can get, just like they've done in other sports and states, and deal with the lawsuits later.”

Dave Basler, the executive director of the Ohio HBPA, agrees with Drazin that litigation might be the ultimate answer, but Michele Fischer, a wagering consultant and vice president of SIS Content Services, believes that prediction markets could be beneficial to horse racing.

“We missed the mark with sports betting for the horse-racing industry,” she said. “It's a highly regulated form of gambling, and that's something that's still on the table for horse racing. I think that the conversation needs to be a little wider. We sit here and look at all the threats, which they all can be. But where are those opportunities for this new market we've been talking about for 20 years? Where are all the eyeballs that we wanted on horse racing? What are they watching?”

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