Americans are on pace to lose more money to legal gambling this year than at any point in this country’s history.
new analysis Economic writer Joseph Politano predicts the total will exceed that. Losses have increased by 67% since the outbreak of COVID-19 and have increased by a further 8% in the past year alone, outpacing the growth recorded between 2000 and 2020.
This figure only includes sportsbooks and casinos, and does not include funds moved via prediction markets, crypto trading, or stock options. With billions of dollars a year currently poured into activity in each market, economically speaking it’s more of a gamble.
The gap between what regulators call gambling and what they call investing has become one of the strange features of American financial life.
Even if you live in a state where sports betting is illegal, you can open a cryptocurrency prediction market app and get opinions on things like whether the Federal Reserve will cut interest rates in September, whether a hurricane will make landfall in Florida, or which team will win the World Series.
A trader with no regard for economic fundamentals can buy an option that expires in 6 hours. In theory and in practice, this amounts to betting on which direction the stock index will move before lunch.
A teenager with a cryptocurrency wallet can invest in tokens that exist purely because a meme went viral.
Each of these activities involves risking money to uncertain outcomes, and each is subject to different regulators, different legal standards, and, in some cases, no meaningful oversight at all.
scale of gambling problem
According to a report by the American Gaming Association, U.S. commercial gaming revenue hit a record high of $78.72 billion in 2025, an increase of 9.2% from the previous year. Sports betting alone generated $16.96 billion in revenue for a total handle of $166.94 billion, an increase of nearly 23% in revenue and 11% in handle value compared to 2024, when Americans already legally bet just under $150 billion on sports.
Since the 2018 Supreme Court ruling, Murphy vs. NCAA The federal ban on sports betting was lifted, 39 states and Washington DC legalized some form of sports betting, and the industry has expanded every year since.
Politano’s analysis highlights that the rise in gambling is having an impact far beyond sportsbooks’ balance sheets. Research cited in his paper found that in states where sports betting is legal, the incidence of intimate partner violence increases by 10 percentage points when the home NFL team loses in an upset compared to states without legal gambling.
Another study by New York Fed economists Jacob Goss and Daniel Mangrum found, based on millions of credit reports, that debt delinquency rates rose as states legalized sports betting, with the effects concentrated among men and people under 40. That’s not the case with AGA’s revenue figures, which measure industry growth without accounting for the burden on the households that finance it.
At the same time, a range of markets that regulators do not classify as gambling at all are growing even faster in percentage terms.
Prediction market activity also skyrocketed. According to data compiled by Gambling Insider, notional trading volume across major prediction market platforms in 2025 will be more than $44 billion, with Polymarket and Kalshi together accounting for approximately $38 billion to $39 billion of that. From January to November 2025, polymarket accounted for approximately $21.5 billion, and Karshi accounted for $17.1 billion.
Options markets and cryptocurrencies have also seen an increase in individual participation in short-term speculation. According to Cboe’s year-end report, total U.S.-listed options trading volume exceeded 15.2 billion contracts in 2025, the sixth consecutive annual record and a 26% increase compared to 2024.
S&P 500 zero-day-to-maturity contracts, or options that open and close within one day, average 2.3 million contracts per day, accounting for 59% of total SPX trading volume, with retail traders responsible for roughly half to 60% of that flow.
In terms of cryptocurrencies, Memecoin has fallen 61% from its high in early 2025 to around $36.5 billion, recovering to around $47.3 billion in early 2026. CryptoSlate’s own year-end results for the worst-performing tokens of 2025 tracked their back-and-forth through a series of celebrity and political-themed launches that made early insiders rich and left late retail buyers under the radar.
What makes this set of activities worth considering together rather than as separate industries is that, despite different legal treatment, the underlying economic behavior is often the same.
Traders who buy contracts on whether the Fed will cut interest rates in September and traders who buy out-of-the-money options tied to the same Fed decision are both using federally regulated market infrastructure to express short-term views.
A more striking contrast is sportsbook style event betting. While sports betting conducted through licensed books faces state gambling regulations, the publication of similar events conducted through federally regulated prediction markets lacks similar state licensing, tax collection, or responsible gaming requirements and is therefore subject to litigation under derivatives law.
This is the fault line that the gambling industry has begun to fight over. AGA estimates that the anticipation market offering sports-related contracts has diverted more than $500 million in potential state and tribal gaming tax revenue since the beginning of 2025.
The battle has already sparked a tangle of lawsuits and state enforcement actions in Nevada, Massachusetts, Arizona and Tennessee, all testing whether federal derivatives laws preempt state gambling laws.
The CFTC itself is divided on this issue across generations. Former Chairman Gary Gensler filed a brief for the AGA in June, arguing that Congress never intended for the agency to become a national sports betting regulator, but the current CFTC is suing states directly to assert exclusive jurisdiction over the same contracts.
This dispute has divided the gambling industry itself. DraftKings and FanDuel both left the AGA in November 2025, after the trade association transitioned to an attorney-member operation of prediction markets, days before DraftKings launched its own federally regulated event contract product.
Within six months, the product’s annual trade execution rate reached $3.1 billion. While this is a fraction of Calci’s size, it proves that the state-licensed sportsbook industry currently sees more upside potential in the federal derivatives brain than in the framework it took a decade to build.
Why regulation still depends on category rather than risk
Current regulatory frameworks still rely on legal categories constructed for different markets. That is, securities laws for securities and their options, commodity laws for futures and event contracts, and state gaming laws for wagers.
The problem is that new products and retail transaction behavior are blurring the practical lines between these categories. Instant-day options, sports contracts in prediction markets, and short-term meme coin trading can expose users to similar loss patterns, but trigger very different safeguards.
This has consequences that are difficult to justify on grounds other than historical coincidence. Depending on platform access and ongoing litigation, residents of states where sports betting is not legal may be able to trade sports-related event contracts through federally regulated prediction markets with fewer sportsbook-specific restrictions than those applicable to licensed books in states where betting is legal.
Retail traders can lose paychecks on same-day options with the same speed and finality as if they lost a parlay, but their losses would be recorded as an investment result, not a gamble, and would be exempt from the responsible gambling infrastructure the state has spent years building.
On the other hand, meme coins with no underlying business could potentially avoid significant federal oversight, as long as their launch, promotion, and sale do not expose them to securities laws, leaving a large speculative market outside of certain consumer protection regimes applicable to gambling.
Economists and gambling researchers who study these overlapping markets tend to argue that regulations need to track factors such as the risks a product actually poses, its leverage, duration, potential for addiction, and potential for catastrophic loss, rather than which legal bucket it happens to fall into.
Under that framework, same-day option contracts and same-day sports betting would be subject to similar scrutiny, regardless of which regulator signed it. Also, memecoins, which have a 99% chance of losing most of their value within two months, will not escape scrutiny simply because they are denominated in stablecoins rather than dollars.
This does not mean that every dollar sent through prediction markets, options, or crypto tokens represents gambling in disguise, and much of the activity in each category reflects genuine hedging, price discovery, or long-term investing.
But the country has developed an elaborate legal system that treats the same economic activity differently depending on which door one walks through to place a bet, taxing and regulating sports wagers made through sportsbooks much more heavily than the same bets made through federally sanctioned exchanges, while leaving the entire category of speculative crypto assets largely untapped.
Americans are losing historic amounts of money through all of these channels simultaneously, and the regulatory system meant to protect them was built for a version of finance that no longer exists.
