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Iowa senator wants to compel prediction market operators to share revenue with state
A proposal in the Iowa Senate would mandate that exchanges register with the state, pay licensing fees, and pay a percentage of their revenue from trading.
As the legal debate over whether prediction exchanges can offer contracts based on sporting events is playing out in federal and state courts across the United States, Iowa Senator Mike Klimesh seeks to force the exchanges to cut the state in on the action. Klimesh's proposal would add new state-level requirements for the exchanges, which seem bound for litigation should the filing become law. If you're in a legal online casino state, click here to get a $40 credit plus 500 bonus spins at FanDuel Casino:
Proposal takes aim at prediction exchanges offering contracts to Iowans
Klimesh shared SF 2085 on Jan. 21, and the matter is now with the Iowa Senate's Ways and Means Committee. It would ban the offering of event-based commodity contracts in Iowa without a proper permit from the state.
The permits would cost $10 million upfront and be subject to a $100,000 annual renewal fee. Iowa would also assess a privilege fee upon permit holders amounting to 20% of their revenue from trading on their platforms.
Currently, the federal Commodity Futures Trading Commission (CFTC) regulates exchange markets that deal in event-based commodity contracts. They have contended that the CFTC's oversight surpasses any state-level regulation, a claim currently under litigation. Iowa residents can already claim the latest Kalshi promo code and start trading.
Courts could decide scope of exchange regulation
Multiple state attorneys general, state gaming regulatory bodies, and tribal gaming authorities have taken legal action against the operators of event-based commodity contract exchanges regarding their contracts for sporting events. That has led to mixed results so far.
For example, a Massachusetts court ruled that prediction markets cannot legally offer their sporting event-based contracts in the state. However, a federal court has issued an injunction in favor of such platforms regarding sporting event contracts in New Jersey.
No state has enacted new statutes regulating the exchanges to date, though, which would introduce a new wrinkle into the debate. Litigation over Klimech's proposal, should it become law in Iowa, would focus on the application of federal preemption in this context.
So far, exchange platforms have not infringed upon the territory of online casino sites for real money. However, firmer legal footing for sporting event-based contracts could be a prelude to the exchanges offering contracts based on the result of casino game interactions.
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Klimech's legislation could force the issue on further clarification of the legal offerings at online exchange markets. For now, it's merely something that people interested in the space are watching.
