US States Push for Federal Gambling Commission Amid $100B Market Boom
The explosive growth of a potential US federal gambling commission is becoming a hot topic as the nation’s gaming industry reaches unprecedented heights. According to the American Gaming Association, the U.S. gaming industry generated close to $110 billion in gaming revenue in 2023, a remarkable 40 percent higher than 2019 levels. Meanwhile, commercial casino gaming and sports betting spending increased by 10.3 percent to $66.66 billion in the same year, marking the third consecutive year of record revenue.
Furthermore, we’ve witnessed a dramatic transformation in states with online gambling accessibility. Today, 30 states and the District of Columbia allow online sports betting, with more than half of U.S. states having legalized this form of gaming and gambling. However, this rapid expansion hasn’t come without concerns. A recent Senate hearing highlighted significant issues regarding the current state of sports betting, including worries about prop bets in college athletics, data collection practices, and the protection of consumers from gambling-related harms. Consequently, the debate between state-level regulation and federal oversight continues to intensify, especially as legislative efforts are currently underway in states like Illinois, Indiana, Massachusetts, New Hampshire, New York, and Wyoming to authorize additional forms of online gambling.
Can Federal Law Override State Gambling Authority?
The ongoing battle between federal and state authorities over gambling regulation has reached a critical juncture with recent court cases challenging traditional state sovereignty. States have historically been primary enforcers of gaming regulation, whether addressing illegal activity or regulating legalized sports gambling on a state-by-state basis. Yet this established framework faces unprecedented challenges as federally regulated entities enter the gambling space.
The Kalshi case and CFTC jurisdiction
Prediction market platform Kalshi has become the focal point in this jurisdictional tug-of-war. After receiving a cease-and-desist letter from New Jersey's Division of Gaming Enforcement in March 2025, Kalshi filed suit arguing that federal law preempts state enforcement efforts. The company operates as a designated contract market registered with the Commodity Futures Trading Commission (CFTC), offering "event contracts" on real-world outcomes - notably sports events.
Kalshi's legal strategy centers on the Commodity Exchange Act's grant of exclusive jurisdiction to the CFTC. In a significant development, the CFTC recently dropped its appeal of a federal judge's ruling that had allowed Kalshi to take bets on U.S. political elections, strengthening the company's position in other legal battles.
Arguments from 34 state attorneys general
In response to these developments, attorneys general from 34 states filed an amicus brief urging the Third Circuit to reverse the district court's ruling. Co-led by Ohio and Nevada, these AGs present several core arguments: first, that Kalshi's products are functionally identical to sports betting; second, that gambling regulation represents a traditional state responsibility dating back to 17th-century colonial prohibitions.
Additionally, the AGs emphasize that preemption requires a clear Congressional statement - something they argue the CEA lacks. They also assert that federal commodity regulation fails to provide the consumer protections inherent in state oversight, such as licensing requirements and exclusion programs.
What the courts have ruled so far
The judiciary has thus far leaned toward federal preemption. In April 2025, U.S. District Court Judge Edward Kiel granted Kalshi a preliminary injunction against New Jersey regulators, temporarily blocking enforcement action. The court held that Kalshi's event contracts "fall within the CFTC's exclusive jurisdiction". Similarly, Kalshi secured a preliminary injunction against the Nevada Gaming Commission on April 9, 2025.
These rulings raise fundamental questions about the future of dual sovereignty in gaming regulation. If upheld, they could create a precedent allowing companies to bypass state gambling laws by operating under federal commodities frameworks. For state-licensed operators who have invested heavily in compliance, this prospect is particularly concerning as it potentially enables competitors to operate under lighter federal oversight.
Senate Hearing Signals Growing Federal Interest in Gambling Oversight
Recent federal scrutiny of the gambling industry intensified during a December 2024 Senate Judiciary Committee hearing examining the widespread legalization of sports betting across America. The session marked the first serious congressional examination of potential national regulations for the $10 billion sports betting industry.
Key takeaways from the Judiciary Committee hearing
Senate Judiciary Committee Chair Dick Durbin opened the hearing by highlighting how sports betting has become a public health issue since the 2018 Supreme Court decision that struck down federal prohibitions. Committee members from both parties expressed openness to federal intervention, with Republican Senator Thom Tillis noting he was "very open" to an independent commission tasked with creating guardrails for states.
NCAA President Charlie Baker testified about increasing integrity concerns and betting-related harassment facing college athletes, subsequently advocating for nationwide prohibition of prop bets on college sports. During his testimony, Baker revealed that some student athletes have received death threats from bettors dissatisfied with their performance.
SAFE Bet Act proposals and their implications
Initially introduced in September 2024, the Supporting Affordability and Fairness with Every Bet (SAFE Bet) Act represents the first comprehensive legislation addressing public health implications of legalized sports betting. The bill proposes strict regulations including:
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Prohibiting sports betting broadcast advertising between 8am-10pm and during live sporting events
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Banning advertisements featuring terms like "bonus," "no-sweat," or similar promotions
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Limiting customers to five deposits within 24 hours and prohibiting credit card deposits
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Requiring affordability checks for high-volume bettors
Concerns over AI, advertising, and college betting
Significantly, the legislation targets artificial intelligence use in gambling, prohibiting AI applications that track individual gambling habits or create personalized promotions. The International Gaming Standards Association is nevertheless developing guidelines for appropriate AI deployment within the gambling sector.
College sports protection remains a focal point, given that approximately 10-15% of Division I athletes report experiencing harassment from gamblers. This harassment ranges from online messages to death threats severe enough to require police protection.
Industry Pushback Highlights Tensions Over Federal Involvement
As states embrace various forms of legalized gaming, fierce resistance to federal regulatory oversight has emerged from gambling industry stakeholders. This pushback underscores fundamental tensions between state autonomy and potential federal involvement in the rapidly expanding U.S. gambling market.
Why operators prefer state-level regulation
Gambling operators fundamentally prefer state-level regulation because nearly 4,000 dedicated public servants already regulate all forms of gaming, including sports wagering, across the country. These state regulators commit more than $500 million to ensuring commercial casino operational integrity, while $822 million was spent on tribal gaming regulation in 2015 alone. Currently, 48 states permit some form of gambling, with regulatory approaches ranging from the business-friendly "Nevada model" to the more restrictive "New Jersey model".
American Gaming Association's stance on federal oversight
The American Gaming Association (AGA) has consistently opposed expanded federal involvement, with its Senior Vice President Joe Maloney describing proposed federal oversight as "bereft of testimony on how legal gaming protects consumers from the predatory illegal market". Bill Miller, AGA President, testified before the Senate Judiciary Committee that "the federal prohibition on sports betting was a failed endeavor that we shouldn't replicate". The organization characterizes federal regulation proposals as "the epitome of a solution in search of a problem" and "an unprecedented and inappropriate expansion of federal involvement".
Potential impact on gambling commission jobs and licensing
A shift toward federal regulation could fundamentally alter the employment landscape for state gambling commissions. Moreover, state-licensed operators who have invested heavily in compliance with varied state requirements might face competition from entities operating under potentially lighter federal oversight. David Rebuck, former Director of the New Jersey Division of Gaming Enforcement, maintains that federal oversight is "clearly not needed", arguing that states and tribal jurisdictions remain best equipped to address regulatory challenges through existing frameworks.
What Would a Federal Gambling Commission Look Like?
Examining successful models abroad offers valuable insights as lawmakers contemplate establishing a federal gambling commission in the United States. The potential structure of such a regulatory body remains a subject of intense debate, albeit with several clear precedents worth considering.
Comparing with the UK and Gibraltar gambling commissions
The UK Gambling Commission serves as a prominent template, operating with three primary statutory objectives: preventing gambling-related crime, ensuring fair and transparent gambling operations, and protecting vulnerable individuals. Structurally, the Commission functions as a non-departmental public body with administrative classification by the Cabinet Office. In contrast, Gibraltar maintains a selective licensing approach, primarily targeting "blue chip companies with a proven track record". The Gibraltar Regulatory Authority has helped establish international gambling standards alongside Malta, focusing extensively on player protection and operator accountability.
Possible roles: licensing, enforcement, consumer protection
Any federal gambling commission would likely mirror existing models by assuming responsibility for:
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Licensing operators and monitoring compliance
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Investigating violations and enforcing regulations
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Implementing consumer protection measures
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Addressing money laundering concerns
Currently, the National Indian Gaming Commission demonstrates limited federal regulatory involvement, with authority to approve management contracts and tribal gaming ordinances. A comprehensive federal commission could expand these powers through rulemaking authority comparable to the UK model, which focuses on "using data and analytics to make gambling regulation more effective".
How it could affect states with online gambling
For states with legalized online gambling, a federal commission could introduce standardized licensing requirements, potentially streamlining operations for multi-state operators. Nonetheless, this would fundamentally alter the current approach where states like New Jersey maintain primary authority over gambling activities within their borders.
Challenges in balancing state and federal powers
Ultimately, the core challenge involves reconciling traditional state gambling authority with federal oversight. The American Legislative Exchange Council emphasizes that "as a form of commerce conducted within state borders, the federal government has traditionally left gambling regulation up to the states". Forth, any federal commission would need to establish clear jurisdictional boundaries to avoid the preemption conflicts currently playing out in cases like Kalshi.
Conclusion
The gambling landscape in America stands at a pivotal crossroads. As the industry approaches the $110 billion revenue mark, questions about appropriate oversight grow increasingly urgent. State regulators certainly possess decades of experience managing gambling operations, yet this patchwork approach faces unprecedented challenges from federally regulated entities like Kalshi.
Federal intervention seems almost inevitable given recent Senate hearings and proposed legislation like the SAFE Bet Act. Nevertheless, significant obstacles remain before any national gambling commission becomes reality. The industry, primarily through the American Gaming Association, actively opposes such oversight, arguing that existing state frameworks adequately protect consumers while supporting economic growth.
Looking at international examples reveals potential blueprints for an American commission. The UK and Gibraltar models demonstrate how centralized oversight might function, though adapting these frameworks to our federalist system presents unique challenges. Above all, the fundamental tension between state sovereignty and federal authority continues to define this debate.
Though multiple paths forward exist, one fact remains undisputed—the explosive growth of online gambling demands thoughtful regulatory responses. Whether through enhanced state cooperation or eventual federal oversight, consumer protection must remain paramount. The outcome of this regulatory tug-of-war will undoubtedly shape the future of American gambling for decades to come. Still, regardless of which approach prevails, striking the right balance between innovation and responsible gaming practices remains essential for the industry's long-term sustainability.