Why Can't We Be Friends
A look at the gambling industry's shifting alliances and increasing operator-regulator tensions, which have escalated with the onset of prediction markets.
I’m a big fan of the Cobra Kai Netflix series (I know, huge surprise). What may be a bit surprising is that the series reminds me of the gambling industry, because at its heart, Cobra Kai is all about the ancient proverb: “The enemy of my enemy is my friend.”
Like the gambling industry, in Cobra Kai, dojo alliances shift every season, as the show’s characters form fragile coalitions, often held together by the thinnest threads of mutual survival. And like the gambling industry, all it takes is one wrong move for a longstanding grudge to resurface, and the whole thing spirals into chaos.
That makes for good TV, Good for a fictional TV show, but is far from ideal in the real world. Still, that’s exactly the drama unfolding in gambling right now. There’s inter- and intra-fighting in the industry, with companies split over everything from sports betting (the FanDuel/DraftKings on-again-off-again relationship with California tribes) and online casinos (NAAiG members vs. online-first companies) to the rift within the rift caused by prediction markets (with multiple operators splitting from the AGA).
And with the industry divided (which I discussed here), there’s also been a rekindling of the fight between regulators and operators.
It Was Fun While It Lasted
After spending a decade “working together,” the regulator-operator relationship appears to be returning to its more traditional adversarial roots, and that tension is likely going to be cranked up to 11 now that several major operators are getting involved in the prediction market space.
While the operator-regulator tension never completely went away, they were more under the surface over the last decade-plus. That seems to be changing, as the old adversarial instincts are bubbling to the surface, much like Kreese or Terry Silver slithering out of a hole to wreak havoc on the lives of Daniel and Johnny.
Operators are ditching alliances and forming like-minded coalitions, regulators are issuing warnings about lines that should not be crossed, and the whole scene feels like it’s building toward an All-Valley Tournament showdown.
Licenses may not be at risk, but as I noted when DraftKings and FanDuel announced their entry into prediction markets and said sayonara to the AGA and Nevada:
“I don’t know precisely what recourse states will have, but what happens next could make the tension between Barstool and state regulators look like Ward and June Cleaver’s marriage.”
And I think we are starting to see the first inklings of a new, no-quarter policy given to sportsbooks:
“The Massachusetts Gaming Commission today unanimously denied a request from DraftKings to void 27 parlay wagers from a single patron for a total stake of $12,950 on Lukes notching at least eight total hits in the ALCS. Due to an error from a DraftKings trader, the user was able to bet the highest hit threshold for Lukes, eight or more hits in the series, at inflated odds by parlaying lesser hit thresholds for the series that ‘added no independent element of chance.’”
Don’t be surprised if fines continue to escalate.
This Was Inevitable
As Straight to the Point noted more than a year ago, in a column titled, “Don’t Bite the Hand That Feeds You,” the operator-regulator tension first reared its head when sportsbooks decided to no-show the Massachusetts Gaming Commission:
“I don’t see this ending well. The industry could be in for the rudest of awakenings. In the best-case scenario, the MGC will be miffed, and the relationship between regulator and operator will be strained for the foreseeable future. Strained relationships aren’t good, as favors and benefits of the doubt go out the window… Massachusetts has demonstrated what it is capable of but has, thus far, followed Patrick Swayze’s advice in Road House: ‘Be nice.’ The second part of that line is, ‘Until it’s time to not be nice.’”
So how did we get to this point? As I put it recently, the transactional nature of the industry is a good place to start: “A good way to describe the current gambling landscape is that it is becoming overrun with people who refuse to wait in line.”
Meaning, the industry was happy to play nice, so long as it was getting what it wants. But that means they are willing to toss relationships aside if they think they are being blocked. The old adage that you learn a lot about a person in bad times is apropos here, as everyone can get along when everything is sunshine and puppy dogs.
But now that the legalization frenzy (which lasted from 2018 to 2023) is over, cracks are emerging. The current mindset of some operators seems to be that if we can’t persuade you to fall in line with our opinion, we’ll just ignore you or run you over. The problem you run into is that you eventually run into Dalton (Patrick Swayze), who will be nice… until it’s time to not be nice.
The Golden Era of Regulator-Operator Relationships
For over a decade, the US gambling industry enjoyed a remarkably cooperative relationship with regulators. When New Jersey legalized online casinos in 2013, New Jersey Division of Gaming Enforcement chief David Rebuck constantly noted the aligned goals of regulators and the industry it oversaw.
In a 2024 interview with EGR, Rebuck talked about his decision to thaw the operator-regulator relationship and make it less adversarial: “While we weren’t going to agree with everything the industry wanted, we’d be clear why, and educate them on the reasons, and help them seek another way forward.”
As noted, things began to go sideways in May 2024 when Massachusetts’ licensed sportsbooks — except Bally’s — no-showed the MGC. Commissioners expressed outright anger, viewing it as akin to a prom-night snub. Even though operators sat for a follow-up hearing in September, the damage was done.
Fast-forward to November 2025, and the rift is now a mile-wide after several operators have embraced prediction markets, despite regulatory warnings.
Further, the DraftKings, FanDuel, and Fanatics exit from the American Gaming Association underscores irreconcilable differences between aggressive online disruptors and traditional stakeholders. Which means multiple different points of view are being whispered into the ears of regulators and lawmakers.
The Future
So what happens next?
Regulators may further tighten reins, imposing harsher fines/penalties for violations or instituting new advertising policies and other restrictions, where legally possible through regulatory mandate. There is also the potential for license reviews (as we’ve seen in Arizona).
Yet, if prediction markets prevail in court, it might force regulators to come to the bargaining table, with very little leverage. But, there is also a world where prediction markets don’t come out on top. So the industry must decide: double down on confrontation or start to repair relationships.