California Learned Harsh Lesson During NFL Super Bowl

The state of California learned a harsh-but-necessary lesson during the NFL Super Bowl LX matchup between the New England Patriots and now-reigning champion Seattle Seahawks: Their sports betting laws are not even kind of, sort of, close to working.

As most already know, sports betting in California remains strictly forbidden. Attempts have been made to change that, but to no avail.

In fact, there has really only been one major push to legalize California sports betting. It came back in 2022. For a while, it looked as if the attempt would be successful. Yet, a lack of collaboration between California tribes and online sportsbooks led to a pair of separate measures completely at odds with one another. The public did not respond well to the competing agendas. Both sports betting bills were thoroughly voted down at the polls.

In the years since, nothing has come close to rivaling the significance of the 2022 push. Indeed, we hear about improved relationships between the tribes and corporate sportsbooks. Prospective timelines are even laid out. But no positivity has meaningfully reinvented current projections. The future of California sports betting is not just uncertain. Its legalization is considered a pipe dream by most in the know.

What it takes for that to change remains to be seen. However, it is becoming increasingly clear that The Golden State’s blanket ban on sports betting will not actually prevent residents from finding ways to, well, bet on sports.

The primary reason why? Prediction markets.

What Are Prediction Markets?

Here’s the buzzphrase you are probably reading and hearing on a daily basis: prediction markets. These sports betting alternatives continue to gain popularity. That might even undersell their rise.

For anyone unfamiliar, prediction markets provide “yes or no” outcomes on events. In the case of the NFL Super Bowl, something as simple as “Will the Patriots beat the Seahawks?” would be one example. Anyone using a prediction-market app can “trade” on this question and receive a payout if they prove to be correct.

The similarity to conventional sports betting is by design. Prediction markets want to be an alternative to sports gambling. At the same time, they argue their business model significantly differs. This belief is rooted in how payouts are determined and delivered.

While betting odds to win the NFL Super Bowl are cobbled together by official linemakers, prediction-market returns are inextricably tethered to the public. For instance, if more people “traded” on the Seahawks to beat the Patriots, the payout for doing the same would be lower than if you took the opposing side.

This is not entirely different from how traditional NFL Super Bowl betting lines work. Sportsbooks do take into account the amount of action that’s being invested in a given outcome. But more statistical modeling goes into their creation than just that.

According to prediction-market operators such as Kalshi and Polymarket, this is the key difference between their sites and conventional gambling. And so far, this argument is holding up. Formal rulings haven’t exactly been issued, but it cuts both ways. Prediction markets may exist in a legal gray area, but that also means they haven’t been ruled against, either. And because they are not considered gambling, they operate under federal law. This allows them to exist in markets that haven’t legalized sports betting.

Californians Flocked to Prediction Markets Ahead of the NFL Super Bowl

This brings us back to the impact on California. Prediction markets initially resisted entering The Golden State. Not anymore. And they are already drawing in a ton of business from Californians.

The lead-up to Super Bowl LX proved as much. Allie Canal, Suzy Khimm and David K. Li reported on the prediction-market wave for NBC news, and some of their findings are jarring. Consider this excerpt:

“The scale of activity around this year’s Super Bowl helps explain why prediction markets have drawn such scrutiny. Kalshi said trading volume on its Seattle–New England Super Bowl market had surpassed $161 million as of Tuesday evening, with nearly 70 percent of traders favoring Seattle. That’s more than six times the volume Kalshi recorded on its Super Bowl winner market last year, a jump it attributed to the rising popularity of prediction markets.”

It remains to be seen how much of this action, specifically, came from residents in California. As the NBC News report also notes, Californians have not glommed onto prediction markets at the same rate as other states.

Still, the NFL Super Bowl took place in California. That drives up a ton of extra interest by default. With that extra interest comes additional gambling. Super Bowl LX was probably an introduction to prediction markets for thousands, if not tens of thousands, of Californians.

The real kicker? There’s little the state can do about changing that.

Prediction Markets Aren’t Leaving California Anytime Soon

Given California’s enforcement of sports betting laws in the past, many expect the Attorney General’s office to aggressively pursue action against prediction markets. And hey, they might. But they shouldn’t expect much to change if they do.

“I think there’s a good chance that [federal courts] will let this continue for at least a couple more years,” I. Nelson Rose, a specialist in gaming regulations and law professor emeritus at Whittier College in California, explained to NBC News. “I mean, California actually has a 100-year-old statute that makes it a misdemeanor to accept, record or even make a bet on a sports event. And yet, here we are now.”

Rose’s assessment aligns with what we’re seeing across the rest of the country. Other states have filed motions against prediction-market operators. All of them, however, remain operational while various litigation is still pending.

It’s hard to imagine the case of California will be any different. The current regime under president Donald Trump has repeatedly shown favor to predictions markets. The president’s son is even an investor in Kalshi.

As for what this means to the future of California sports betting, nobody seems quite sure. It could theoretically heighten the urgency among tribes to legalize it. Or it could mean the state missed its chance to establish a sports betting scene that won’t trail the popularity of prediction markets. Only time, and more importantly, additional data points will tell.

Take a look at this list of the top online sportsbooks so you can find one that works for all of your sports betting needs: