“Cannibalization does not come into it at any point. I think it’s willfully misunderstood by people who wish it were lower or want to say it’s zero.” ~ David Forman
“When you describe it neutrally to them, they overwhelmingly say it’s a sports bet. I know nobody believes that these products aren’t sports betting.” ~ David Forman
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In this episode of Straight to the Point Talking Shop, I was joined by David Forman, Vice President of Research at the American Gaming Association (AGA).
The conversation centers on the AGA’s prediction market fact sheet and its widely discussed “lost revenue tracker,” which estimates that states have missed out on over $1 billion in potential tax revenue from sports betting activity occurring on prediction market platforms like Kalshi.
Forman walks through the AGA’s methodology in arriving at the $1 billion number. Per Forman, the AGA uses publicly reported trading volume from Kalshi, which the AGA estimates is 65% of the US market. It then converts that trading volume into sports betting handle (a percentage that has declined to around 30%, given the growing share of parlays). The AGA then applies the industry’s average hold percentage and state tax rates to arrive at the estimated lost tax revenue.
Importantly, Forman stresses that the figure is not a cannibalization argument. It simply shows what tax revenue would have been generated had the same sports betting activity occurred on a licensed, state-regulated sportsbook.
Forman notes that polls and comment sections consistently show the public views these products as sports betting, regardless of how they are framed as “event contracts” or “trading.”
He highlights concerns around marketing practices, including ads that promote big wins as a way to pay rent, the use of young influencers, and the absence of responsible gaming safeguards comparable to those required of licensed operators. Forman contrasts this with the regulated gaming industry’s more serious approach, pointing to the AGA’s “PlaySmart from the Start” campaign, which emphasizes intentional play.
He also shares positive national trends: land-based casino revenue grew more than 2% in the first quarter, while online gaming continues its strong expansion, suggesting the two channels are largely complementary at a national level (as Forman hinted, at the individual casino and operator level, your mileage may vary).
This is a data-driven conversation for anyone following the evolving intersection of prediction markets and regulated gaming.
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