Key Takeaways
- A sportsbook needs CFTC-regulated status first, either by registering its own designated contract market or by partnering with a registered exchange and a futures commission merchant.
- State gaming regulators oversee sportsbooks, while event contracts are treated as swaps or options under the CFTC.
- Even with that approval, states like Ohio, Michigan, and Arizona have warned that offering sports event contracts could put a sportsbook’s state license at risk.
- See how Idea Usher can help businesses develop a compliant, launch-ready sportsbook platform.
No, a sportsbook can’t add event contracts under its existing state license. It needs CFTC-regulated status first, either by running its own exchange or by working with one that already holds it. The reason is who oversees each product. State gaming commissions, and in some places tribal regulators, license sportsbooks under sports wagering laws. Event contracts are classed as swaps or options, so the CFTC regulates them. An operator that wants to list them must register a designated contract market itself or partner with a registered exchange and a futures commission merchant. The second route is faster, though even getting FCM status can take about a year.
Plenty of operators want in anyway, since prediction markets are pulling users away from traditional betting apps. But the risk doesn’t end once the federal piece is sorted. Regulators in states like Ohio, Michigan, and Arizona have warned sportsbooks that offering sports event contracts could put their state licenses in danger, and the courts haven’t settled the argument yet.
In this blog, we’ll discuss which licenses and registrations a sportsbook needs for event contracts, the routes available to get there, and the compliance risks to plan for before launching.
Is the Sportsbook Market Still Profitable for New Operators?
Yes, it can be. But it is hard, and it takes patience. According to Fortune Business Insights, the global sports betting market was valued at USD 113.79 billion in 2025. It is projected to reach USD 295.29 billion by 2034 at a CAGR of 11.18%. That leaves plenty of room for new names. The problem is that FanDuel and DraftKings hold more than 70% of the US online market. New brands also pay a lot to win each player, and state taxes and license fees add more weight. A newcomer can still make money. It needs a clear niche and enough cash to last for years.
Source: Fortune Business Insights
Revenue Potential vs. Operating Costs
Betting brings in money but states take a big piece of it. Most states tax sports betting revenue at 10% to 20%. A few go much higher. New York charges 51%, and Pennsylvania charges 36%. There is also a federal excise tax of 0.25% on legal wagers. So the same amount of bets can leave very different profit depending on where an operator launches.
Tax is only one cost. Odds data, payments, support and ads all cost money too. Promo credits matter as well. Pennsylvania lets operators deduct them, so one analysis found its real tax rate was closer to 24.6%. This is why the launch state matters so much for a new operator.
Customer Acquisition and Competition
Winning a player costs a lot. DraftKings said it spent $20.2 million to win 54,467 customers in New Jersey. That came to $371 each. It expected each player to be worth $2,614 over time, about 6.9 times the cost. FanDuel said it paid around $290 per new customer and got that money back in 12 to 18 months. These are older numbers from the two biggest brands. A newer brand has less name power, so it may pay more.
- About 41% of FanDuel’s sportsbook customers came from its fantasy sports players.
- Caesars offered $3,000 in free bets to win New York players.
- Fox Bet, Fubo Sportsbook and MaximBet are among the earlier challengers that did not last.
How Fanatics broke in
Fanatics Sportsbook took a different road. It bought PointsBet’s US business for $225 million. It also had a big database of retail customers to market to. The sportsbook now runs in 23 states plus Washington, D.C. Players earn FanCash on bets and can spend it on team gear or tickets. Fanatics also put its sportsbook, casino, and Fanatics Markets into one app called Fanatics Sports & Casino. Fanatics Markets is its event contracts platform, and it offers Combos and a live view called FanViz. CEO Matt King said the company spent less than $8 million marketing Fanatics Markets since launch.
Licensing Barriers and Profit Timelines
A license costs real money before the first bet is taken. New York charges a one-time $25 million fee. Pennsylvania charges $10 million plus $250,000 every five years. Massachusetts charges $5 million at the start and another $5 million every five years. Some states also set rules on who can apply. New Jersey makes operators team up with a casino or racetrack. That can shut the door on a new brand even when it has the cash.
Hard Rock Bet and tribal access
Florida is a clear case. Hard Rock Bet is run by the Seminole Tribe of Florida and is the only legal sportsbook in the state. Even so it had a rough start, because it was in and out of service before it reopened in late 2023. Since then, it has added Unity by Hard Rock rewards and weekly Legendary Reward Drops. It also offers Touch to Bet through Genius Sports BetVision and PGA TOUR micro markets from Sportradar, such as picking the winner of a single hole. A new brand cannot copy a position like Florida’s. It has to find another way in.
Profit also comes late. DraftKings needed 13 years since it started, and nearly five as a public company, to post its first full-year adjusted profit. That was for 2024. FanDuel’s 12 to 18-month payback on each player shows the same slow build. A new operator should plan for several years of spending before the numbers turn positive.
Does Your Existing Sportsbook License Cover Event Contracts?
A state sportsbook license does not cover event contracts. Sports bets fall under state gaming law. Event contracts fall under federal commodities rules. These are two separate systems. A sportsbook that wants to offer event contracts needs federal status first. It can get that by running its own exchange or by working with one that already has it. Even then, state regulators may push back. Some have warned that licensed sportsbooks could lose their state license for offering them.
When Rules Treat Them Differently
A sportsbook takes a bet and answers to a state gaming board. An event contract is treated as a swap under the Commodity Exchange Act and falls under the CFTC. So the two products follow different rules from day one. A state license also does not carry over. Even a costly one like New York’s one-time $25 million fee only covers state-run betting.
Sporttrade took the long road
Sporttrade began as a state-licensed betting exchange. It called itself a marketplace where people buy and sell contracts on a central limit order book. It went live in New Jersey in 2022 and later ran in Colorado, Iowa, Arizona, and Virginia. Then it applied to the CFTC to become both a DCM and a derivatives clearing organization. That took close to a year and needed two separate filings. After that, it closed its sportsbook in all five states. Its CEO Alex Kane had said state licensing was a poor fit for low-margin exchange businesses.
Why Exchange Registration Isn’t Enough
Federal status helps. But it does not end the fight with states. Many states say these contracts are plain sports betting with a new label. Courts have not agreed on who is right. The Third Circuit was the first appeals court to rule. In April, it ruled 2-1 that Kalshi’s sports contracts are swaps, and that federal law blocks New Jersey’s gambling rules. Other courts then went the other way.
- On August 28, the Ninth Circuit held that federal law does not override Nevada’s gaming laws because sports event contracts are not swaps.
- On September 25, the Sixth Circuit ruled against Kalshi in the Ohio and Tennessee appeals.
- The Supreme Court has not agreed to take the issue yet.
This split puts licensed sportsbooks in a tight spot. Ohio’s regulator warned that offering sporting event contracts to Ohio residents without a sports gaming license breaks state law. It also said a sportsbook could risk its license even by offering them outside Ohio. Michigan sent operators a similar memo. Seven other states besides Arizona have also warned licensed operators.
Underdog lost ground in Arizona
Underdog shows how real the risk is. It teamed up with Crypto.com to offer prediction markets in 24 states. Arizona had already sent Crypto.com a cease-and-desist letter in May. Then on December 5, the state told Underdog it planned to revoke its fantasy sports license. Arizona said the tie-up put the public interest at risk. Underdog’s prediction product was not even live in Arizona. Underdog said it would defend itself and that states were trying to override federal law.
What Changes When a Sportsbook Adds Event Contracts?
Almost everything about how the product works changes. A sportsbook sets odds and takes the other side of the bet. With event contracts, users trade at prices set by the market. The operator stops earning from a margin inside the odds. It starts earning from fees on trades. Settlement and liquidity also work in new ways. A sportsbook that adds event contracts is really adding a second business with its own rules.
Sportsbook Odds vs Contract Prices
A sportsbook shows odds like -110. An event contract shows a price. A contract trades between 1 cent and 99 cents, and that price is the chance the market gives the event. So a 63-cent contract means about 63%. The margin moves too. With -110 on both sides, each side implies about 52.4%, and the extra 4.8% is the vig. With event contracts, the price is the probability. The cost shows up as a separate fee instead.
| Sportsbook odds | Contract price | |
| How it looks | American odds like -110 | A price from 1 to 99 cents |
| Where the margin sits | Inside the odds as vig | A fee on each trade |
| If you win | Depends on the odds | $1.00 per contract |
| If you lose | Stake is gone | $0.00 per contract |
The fee math is new for a sportsbook team. On Kalshi, 100 contracts at 50 cents cost $50 plus $1.75 in fees. Makers who rest orders on the book pay one-fourth of that rate. Users can also sell early to other traders before the game ends. So an operator has to show prices in cents and charge a fee on each trade.
Novig shows the exchange style
Novig runs a peer-to-peer sports exchange that is open in 47 states. The CFTC approved its DCM application in June. It also joined IC360 to use the ProhiTrade tool against abuse aimed at sports staff and the selfexclude.io site. But it hit a wall. The CFTC told Novig not to list micro contracts, such as which player opens the scoring in a basketball game, because they could be open to manipulation. A new exchange can design new products. The regulator can still say no.
Bookmaker Risk vs Peer-to-Peer Trading
At a sportsbook, the house takes the other side of your bet. It sets the odds and builds in a margin so it profits whatever happens. On an exchange, users trade against each other. The exchange matches them and takes a small fee. So the operator no longer carries the result of each game. Market makers fill that gap. Blockworks Research studied Kalshi’s sports markets and found market makers set spreads around inventory risk and cut displayed size in live play to protect themselves.
- Sportsbook: the house holds the risk on each bet.
- Exchange: other traders hold the risk.
- Market makers: they quote both sides and manage their own exposure.
- Competition: Kalshi holds about 70% of prediction market sports volume, so a new venue starts behind.
The operator’s job changes with this. A bookmaker needs strong pricing and risk teams. An exchange operator needs clear rules and checks on who is trading. The CFTC made that point itself. Any contract on a CFTC-regulated exchange must follow the Commodity Exchange Act. That duty sits with the operator, not with the traders.
Settlement, Liquidity, and Revenue Differences
Settlement looks simple. Each contract ends at $1 or $0. Kalshi charges no settlement fee. The harder question is who clears the trade. ProphetX shows this. The CFTC approved it as both a DCM and a DCO. It calls itself the first sports-native direct-clearing prediction market. Its scorigami contracts settle on whether a game ends with a score that has never happened in that sport. The CFTC told ProphetX those do not fit the legal definition of a swap. A contract has to be easy to settle and also allowed to list.
Thinner live liquidity
A sportsbook fills a bet from its own book. An exchange needs someone on the other side. Blockworks found Kalshi’s in-game depth averages 16.3K contracts per market against a pre-game peak of 73K. The same report said higher fees and thinner live liquidity push larger bettors toward sportsbooks. So live betting may be the weak spot for an operator that adds contracts.
How Operators Earn
The money model flips. A sportsbook earns from the margin inside its odds. An exchange earns from fees on trades. Kalshi’s taker fee runs from $0.07 to $1.75 per 100 contracts depending on the price. That makes volume matter a lot. Sports are 68% of Kalshi’s total volume. An operator needs steady trading to earn well.
Licenses Required to Add Event Contracts in Sportsbooks
A sportsbook cannot just add event contracts with its normal betting license. It needs a federal route through the CFTC. That means owning a registered exchange or working as a broker for one. The contracts also have to be cleared through a registered clearinghouse. On top of that, the sportsbook still has to keep its state gaming license safe. Many states say event contracts on sports are just sports betting, so one license is not enough. A sportsbook should plan for the federal side and the state side together, or it can lose the license it already has.
1. CFTC Registration and Exchange Approval
The CFTC is the main federal regulator for event contracts. A sportsbook can get in through three routes, and the first is registering as a designated contract market or DCM or clearing organization, which is rigorous and slow. The second is faster but needs a registered partner, and the third is buying or partnering with a registered exchange. Running the exchange is a big job too, because a DCM is responsible for product design, trade matching, market surveillance, and compliance across 23 core principles.
- Own exchange (DCM): Full control, but slow and costly.
- Introducing broker (IB): Quicker, but you need a registered exchange behind you.
- Buy or partner: Skip the wait by using someone else’s license.
Even after approval, the CFTC still watches. Exchanges list new contracts by self-certification, but the CFTC can stay or prohibit a contract during review. The license is also valuable, and one report says the race for prediction markets created a $100M market for DCM licenses.
2. State Gaming Licenses and Restrictions
A federal license does not make every state happy. Each state decides what its own licensees may do, so sportsbooks often limit where they offer sports contracts.
DraftKings Predictions Example
At launch, it offered sports and finance markets only where its sportsbook was not operating, and just finance where it was. The company then launched its own exchange called DKeX, built on the Railbird license. One report said the product hit a $2.3 billion annualized trading volume run rate.
3. DCO Registration and Clearing Requirements
Every trade needs a clearinghouse that settles the money. A sportsbook can build one or use a partner’s. Event contracts are simple to clear because they are fully collateralized at all times and settle at $1.00 if the event happens. Kalshi’s own clearinghouse explains that each side must pay enough upfront to cover the most it could lose.
Fanatics Markets Example
Fanatics took the broker route. It bought Paragon Global Markets, and that company is an introducing broker registered with the CFTC and the NFA. Crypto.com supplies the exchange and clearing behind the scenes. Fanatics launched a separate app called Fanatics Markets. It started in ten states, mostly small ones with little real-money gambling. The platform is not available in any state where Fanatics holds a license.
4. Federal vs. State Regulatory Classification
The big question is whether a sports event contract is a federal swap or a state bet. Courts do not agree. The Third Circuit ruled 2-1 for Kalshi and said federal law blocks New Jersey’s gambling laws. Later, the Ninth Circuit ruled 3-0 against Kalshi in Nevada, which created a clear split. New Jersey, Robinhood, and reportedly Crypto.com’s exchange then asked the Supreme Court to decide.
The CFTC has also taken sides, since it sued Arizona, Minnesota, Wisconsin, Illinois, New York and Connecticut over their enforcement actions. Until the Supreme Court answers, a sportsbook has to plan for both outcomes.
5. Existing Sportsbook License Limitations
Your current sportsbook license may be the biggest limit. A normal state license does not cover event contracts. Some regulators go further and warn that doing business with prediction markets can cost you the license.
- Nevada: The gaming board said it may question the suitability of a licensee that works with an unlicensed sports event contract business. FanDuel gave up its Nevada license, and DraftKings withdrew its application.
- Illinois, Maryland and Ohio: Regulators warned licensees that penalties could be as severe as revoking the license.
- Ohio now: The commission told every licensee to cut prediction market ties by October 30.
The safest plan is simple. Offer sports event contracts only where your state licenses will not be hurt. Keep the products on separate apps, as Fanatics did.
Which Regulators Can Block Your Launch?
Two groups can stop you. The first one is the CFTC. It decides which event contracts can trade on a federal exchange. The second group is each state’s gaming regulator. If they think your product is really sports betting, they can go after the license you already hold. Courts also give different answers, so you need a plan that works even when one regulator says no.
What the CFTC and States Control
The CFTC looks at the exchange. If a contract sits on a designated contract market, the CFTC decides what gets listed and how it trades. State boards look at your license. Maryland is the 8th regulator to warn licensed operators that offering these contracts can cost them their license. The CFTC is pushing back from the other side. It has gone to court against 9 states because it thinks only the federal government can make these rules.
| Regulator | What it controls | How it can hurt you |
| CFTC | Exchange and contract list | Can approve, review or pull a contract |
| State gaming board | Sportsbook license and state rules | Can warn, fine, suspend or take the license |
| Tribal gaming authority | Gaming on tribal land | Can block sports contracts there |
The Underdog Example
Underdog shows how fast this can go wrong. It launched Underdog Markets with Crypto.com Derivatives North America and planned to start in 16 states. In Arizona, the product never went live. Still, the Arizona Department of Gaming said it would cancel Underdog’s fantasy sports license. Underdog then shut down its sportsbook in North Carolina and pulled its license application in Missouri. So the real risk was to the license it already had.
How Court Rulings Change Market Access
Judges are split on one question. Is a sports event contract a federal “swap” or just a sports bet? The answer depends on which court you land in. That decides where you can open shop.
Where the Rulings Stand
- Third Circuit (New Jersey): Kalshi won 2-1. The court said federal law protects its sports contracts from state gambling rules.
- Ninth Circuit (Nevada): Kalshi lost 3-0. The court said these contracts are sports bets and not swaps.
- Sixth Circuit (Ohio and Tennessee): Kalshi lost 3-0.
- Fourth Circuit (Maryland): The hearing was in May. There is no ruling yet.
What Happens Next
New Jersey asked the Supreme Court to take the case. Ohio and 38 other states plus Washington, D.C. also asked the justices to settle the question. Until then a contract can be fine in one state and blocked in the next one. Most of the rulings so far came from early fights over injunctions. The Supreme Court usually wants a final judgment first. So build your launch plan circuit by circuit and keep a backup for each one.
Why National Rollouts Still Need States
A federal listing does not remove state rules from the product. Fanatics Markets runs with Crypto.com. Fanatics made it a 21+ platform because it believes real money play should be 21+. It also left the American Gaming Association along with DraftKings and FanDuel over this issue. So a big brand chose the state-style age rule even when the federal path did not require it.
The Age Gap Problem
The age gap is the real trouble. You can trade on a prediction market at 18, but most operators with a state license want players to be 21. In Michigan, a court told Kalshi to geofence its sports contracts with a state-licensed provider and pay $500,000 for every day it breaks the rule. The state also says Kalshi ignores the rules on age checks, self-exclusion, and deposit limits. Some operators stay out of this mess.
DraftKings Predictions and FanDuel Predicts only offer sports contracts in states where they already have a sportsbook, which is 17 or 18 states. A safe rollout means geofencing state by state, a 21+ age gate, and the same player protection that sportsbooks already use.
Which Expansion Model Fits Your Sportsbook?
Most sportsbooks should start with an exchange partner. It is the fastest way in and it keeps the work small. A third-party platform is a good test if you only want to see whether players care. A separate trading platform makes sense only when you can run an exchange and pay for it over many years. Pick the one that matches how much control you want and how much risk your licenses can take.
Use a Regulated Exchange Partner
Here you do not run an exchange yourself. A registered exchange lists the contracts and you send your players to it. For that, your company usually needs its own broker registration, called a futures commission merchant. BetMGM’s CEO said getting that license to partner with a platform is a 12-month process. So plan for a long wait before the first contract goes live.
PrizePicks took this route. It used a subsidiary called Performance Predictions II, a federally approved futures commission merchant. Every market in the app comes from Kalshi’s regulated exchange, and the products got their own names: Team Picks for sports and Culture Picks for culture topics. At launch, the sports contracts were live in 15 states while the wider product reached 38 states plus D.C. The company said it picked where to launch each product with care so state regulators and lawmakers stayed on friendly terms.
Integrate a Third-Party Contract Platform
This route puts someone else’s contracts or tools inside your app. The vendor holds the exchange side, and you hold the player. It is quick to test, but your own license is still on the line. Werner Becher, who runs Kambi, said some US regulators sent very clear letters that a B2B supplier stepping into prediction markets would lose its license right away. BetMGM’s CEO also pointed out that 34 attorneys general do not want sports contracts offered.
| Setup | What you get | Main risk |
| Embed a partner’s contracts | Fast launch and your own look | State boards may call it sports betting |
| Send players out to the platform | Very low build cost | You lose the player and the data |
| Use a vendor’s white-label tools | Less tech work | The vendor’s license is at risk too |
Build a Separate Trading Platform
Novig shows what building looks like. Its exchange is called Ludlow Exchange and the CFTC approved it as a designated contract market. Players trade with each other on an order book, and prices come from supply and demand. The app is open in every state except Arizona, Michigan, and Nevada, plus D.C. It requires users to be 21 or older, and it checks their location before a trade.
What it takes to build
- A compliance plan that covers all 23 core principles in the Commodity Exchange Act.
- Time. ProphetX needed nearly eight months for approval, while Novig finished much faster.
- Clearing. ProphetX also got a clearing license, but Novig did not apply for one.
- Buying instead of building. DraftKings reportedly paid $250 million for Railbird and its exchange.
This route changes the whole business. You stop taking bets and start running a market. Money comes from liquidity and order flow instead of a built-in sportsbook margin. You get the most control, but you also carry every exchange duty yourself.
What Must Change in Your Sportsbook Technology?
Four parts of your tech have to change. You need new data connections for contract prices, a trading engine that can handle an order book, a money system that keeps customer funds separate, and location checks that work on every single trade. Your odds engine and sportsbook wallet cannot just be stretched to do this work. Plan each piece on its own and test it before launch.
1. Connect Event Contract APIs and Feeds
A sportsbook feed gives you odds. An event contract feed gives you prices, an order book, and fills. Those are different things, so you need a new data layer. Kalshi’s API shows what to expect. It has a REST API for market data, orders, and portfolio, a WebSocket API for live order book updates, and a FIX API for firms that use FIX engines.
Plan for rate limits early. Kalshi uses a token bucket with separate read and write budgets, and in its own example a bucket holds 3,600 tokens and refills at 1,200 per second. When you hit the limit, you get a 429 error with no Retry-After header. So build request queues and use local caching. The guide itself suggests bulk requests and caching to cut calls.
2. Support Order Books and Trade Matching
A sportsbook sets the price and takes the other side. An exchange works differently. Users trade directly with each other through an order book, and prices come from supply and demand. Your engine now has to match orders and show depth, and it has to handle the case where nobody is willing to take the other side.
Who fills the gaps
- Market makers such as Susquehanna and Jump Trading post bid and ask prices so customers can trade at any time.
- Susquehanna became Kalshi’s first official market maker and got reduced fees and higher position limits.
- Kalshi, Polymarket, DraftKings and FanDuel also run market-making arms.
- Speed rules differ. One research note found Polymarket adds about a 3-second delay on marketable orders in live sports while Kalshi matches right away.
Sporttrade shows how hard thin liquidity can be. Its users traded against each other and Sporttrade took a commission on winning trades. That commission was much thinner than the margin a normal sportsbook builds into its odds. It shut down its sportsbook in five states and applied to the CFTC to become an exchange and a clearinghouse. The lesson for your build is simple. A matching engine only pays off if enough orders show up.
3. Separate Wallet, Settlement and Audit Workflows
Customer money gets stricter rules once event contracts are involved. A futures commission merchant must keep customer funds apart from its own funds and the accounts must be titled for the benefit of customers. Settlement is a separate job too. A derivatives clearing organization is the body that guarantees the settlement of trades. Your sportsbook ledger cannot just hold all of this in one pot.
Betr gives a good picture of the broker route. It bought the registered introducing broker ACM Futures after waiting seven months without approval. Under that setup the customer technically trades on the partner’s exchange while Betr handles sign-ups, retention and the user experience. Betr plans to run Polymarket’s contracts in a single-wallet app next to its Picks, Sportsbook, Casino and Arcade products. One wallet is easy for players but your books still need to show which money sits in which product.
Audit trail
Records are a big workload. A designated contract market must keep records of its business for at least 5 years. Brokers must also keep books for five years and keep the most recent two years easy to reach. An acceptable audit trail has to follow a customer order from the moment it arrives through the fill.
4. Enforce Location Checks and Restrictions
Location checks are where regulators strike first. Nevada shows why. Kalshi first tried its own IP-based and residency-based blocks but state investigators still placed trades. It then had to roll out multi-source geofencing through GeoComply or pay $120,000 for every day it missed the deadline. The block covered sports, election and entertainment contracts.
The story did not end there. State investigators later placed nine bets on standard iPhones because their phones still had an older app version that had no geofencing. Kalshi had only required users registered in Nevada to update. Washington also ordered a more robust multi-source geofencing system powered by GeoComply.
| What went wrong | What to build instead |
| Basic IP and residency blocks | A multi-source location vendor |
| Old app versions with no geofence | Forced updates for every user |
| Whole categories blocked at once | Contract tags so a state can block sports but not other markets |
Age gates belong in the same system. Novig requires users to be 21 or older and checks their location before a trade. Run both checks at the moment of the trade and not only at sign-up.
What Happens if a State Challenges Your Sportbook Launch?
A state challenge usually shows up as a court order or a regulator notice that tells you to stop one product in that state. Your best move is to stop only the contracts named in the order and keep everything else running. Then you protect customer money and let people close open trades when the order allows it. Keep records of every step because the state will ask for them.
1. Pause Markets, Keep Other Products
The first job is to stop only what the order names. Courts have been narrow so far. In Washington, the order excludes commodities, climate, economics and finance contracts, so those stay open. In Massachusetts, non-sports contracts are untouched, and users can still fund accounts and trade them. So your system needs to switch off one group of markets and leave the rest of the app alone.
Your other licenses are the bigger worry. Caesars Sportsbook sits under a company whose CEO said it will not defy state regulators. Nevada’s board warned that offering event contracts without its approval could hurt a license holder’s reputation and licensure, even if the trading happens elsewhere. That is why a launch plan has to protect the licenses you already hold.
Switching off one market
- Block by category. Washington’s order lists categories like sports, elections and entertainment, not single games.
- Make the geofence work on every app version. Nevada investigators got through on phones that still ran an older version.
- Stop the ads in that state. Washington’s injunction bars marketing the restricted contracts to its consumers.
2. Handle Open Positions and Funds
Players care about two things when a market shuts. Can I get out and can I get my money. Orders so far give three different answers.
The Washington order also told Kalshi to keep the status quo on transaction fees collected from those customers. So do not touch fees or balances in a blocked state until you know what the court wants. Tell customers clearly, too. In Massachusetts, Kalshi had to notify users who tried to buy sports contracts about the injunction. Give yourself time as well. That order allowed 30 days to put controls in place and limit the effect on ongoing contracts.
3. Keep Audit Trails and Disclosures
Courts and regulators ask for records fast. In Massachusetts, Kalshi had to keep communications, logs, location data, and promotional materials for its users in the state. Washington also asked for account activity, location findings, and marketing information. New York went further. Its gaming commission asked a state court to force Kalshi to hand over documents it had first asked for three months earlier.
Marketing counts as evidence. A Washington judge pointed to an ad that told people they could bet on the NFL even though they live in Washington. The Seminole Tribe makes a similar claim about DraftKings in Florida. It says the company marketed its prediction product in ways that blur the line between betting and trading.
The tribe runs Hard Rock Bet, and that app is the only legal online sportsbook in Florida. Under the 30-year deal, the Seminoles are set to pay the state close to $20 billion. With that much at stake, every ad and every disclosure matters.
4. Tell Your Regulator Early
Disclosures matter just as much as records. Nevada said it will look at any license holder that offers event contracts or partners with a company that does when it decides if that holder is still suitable. A clear paper trail of who runs what makes that talk easier. Share your product plan with your regulator before a launch and keep each answer on file.
How Much Does Event Contract Integration Cost?
Event contract integration costs anywhere from about $25,000 to several million dollars, and the route you pick sets the price. A white-label platform runs around $25,000 to $50,000 for setup plus $2,000 to $10,000 a month. A custom build costs $150,000 to $500,000 or more. A broker route needs $45,000 to $1 million in capital, and owning an exchange needs $5 million or more.
Exchange Integration vs Custom Development
BetRivers shows the middle road. Its parent company Rush Street Interactive filed two CFTC applications in May for an exchange and a clearinghouse but said the filings keep its options open and do not mean a launch is coming. It runs sportsbooks in 15 states. If both applications are approved, it would control the exchange and the clearinghouse and would not depend on third-party infrastructure.
| Path | Estimated cost | Estimated time |
| Introducing broker | $45,000 in capital, or none if an FCM backs you | 3 to 6 months |
| Futures commission merchant | $1 million minimum capital | 6 to 12 months |
| White-label platform | $25,000 to $50,000 setup plus $2,000 to $10,000 a month | 4 to 8 weeks |
| Custom build | $150,000 to $500,000 or more | 6 to 18 months before the first trade |
| Own exchange (DCM) | $5 million or more in financial resources | 12 to 24 months or more |
Buying a licensed exchange is the other way in. Polymarket paid $112 million for a CFTC-licensed exchange before it came back to US traders. Most sportsbooks will not spend that much. A broker deal costs far less, but introducing brokers depend entirely on existing exchanges for products and fees, while an exchange gives full control of product design, pricing, and market data.
Market Data, Liquidity and Compliance Costs
Data is a bill that never stops. Official data is used to build and settle contracts. Sportradar’s deal with Kalshi covers official data and live odds for MLB, the NHL, MLS and UFC. Genius gave both Kalshi and Polymarket official data to create and settle contracts. Prices are hard to find because Sportradar, Genius Sports, LSports, and OddsMatrix publish no prices. One industry report put a package of about 300 in-game lines at $4,000 to $6,000 a month.
Liquidity costs real money too. Market makers get paid in lower fees and bigger limits. Susquehanna got reduced fees and higher position limits when it became Kalshi’s first official market maker. If you run your own venue, you pay for this kind of help. One vendor guide says liquidity capital, audits, legal review, and settlement work routinely add 2 to 3 times the base development cost before launch.
Compliance costs
- A DCM must hold financial resources that cover at least 12 months of operating costs, and at least six months of that must be liquid.
- Compliance staff, market surveillance, and legal work stay on the bill every year.
- Custom upkeep runs 15 to 25 percent of the build cost each year, so a $200,000 build needs $30,000 to $50,000 a year.
What Decides the Launch Timeline?
The path you pick decides most of it. KPMG puts a technology vendor deal at 1 to 3 months, an introducing broker at 3 to 6 months, an FCM at 6 to 12 months and an exchange at 12 to 24 months or more. Those numbers move with how ready your team is. A clean and complete application moves faster than one that needs rounds of questions.
Sleeper shows how waiting can stretch. It first applied to the NFA in May and later sued the CFTC for stalling its registration. The NFA approved Sleeper Markets in early January and it launched Team Picks in the app in early February. That is about eight months from the first filing to approval, and it was only an FCM path and not a full exchange.
What slows you down
- The 180-day review for an exchange starts only when the application is materially complete.
- Player data migration, payment setup and new legal approvals can take 3 to 6 months and cost $50,000 to $100,000 in consulting and legal fees.
- Court fights can change the plan midway, as Sleeper found out.
How Are State Regulators Treating Licensed Sportsbooks Entering This Space?
Most state regulators treat a licensed sportsbook as a company that has to keep proving it deserves its license. If it adds event contracts or teams up with a prediction market, the regulator can call that wagering and ask whether the company is still fit to hold the license. This can happen even when the contracts are sold in a different state. So the sportsbook’s existing license is the thing that is most at risk.
Why Ohio Warned Sportsbooks on Licenses
Ohio spoke up first. Its Casino Control Commission sent a letter to licensed sportsbooks that said companies offering sporting event contracts are running online sports gaming, and that needs a license. The letter also said that offering these contracts would count against a sportsbook when the commission checks its suitability. The same risk applies if the sportsbook offers them outside Ohio. A company that stays away from Ohio customers still gets no free pass.
Ohio got tougher with a second letter dated Oct. 20:
- Who got it: sportsbooks, fantasy sports companies and suppliers.
- The deadline: Oct. 30 to confirm they stopped supporting these prediction markets.
- The risk: investigations, suspensions or revocations.
- The background: cease-and-desist orders went to 10 operators and brokers just before, including Polymarket, Coinbase, Robinhood and Novig.
How Nevada ties contracts to approval
Nevada says it very plainly. Its Gaming Control Board sent licensees a notice titled “Sports Event Contracts Are Wagers.” The Board said a contract is a wager even when it is listed on an exchange regulated by the CFTC. So a Nevada sportsbook cannot treat these contracts like a small side product. The notice also reached a huge group, because Nevada has more than 300 licensed casinos and gaming places.
Why Michigan Watches Sportsbook Partnerships
Michigan sent its memo to almost everyone with a license. That meant casino operators, iGaming operators, sports betting operators, suppliers and fantasy operators. The Board said it will think about what a company does in Michigan and in other places when it decides if the license should stay. Executive Director Henry Williams also said enforcement is not decided by how much money a licensee brings in.
Direct offers
Michigan has 15 authorized online gaming and sports betting tribes, casinos and platform providers. The same report said four of them have some link to prediction markets or have talked about it. That shows how close the issue already is to the companies Michigan licenses. Any one of them could be pulled into a review.
Affiliate and Partner Deals
The memo talks about licensees who may operate, offer or help people get access to prediction markets. So a partner role is covered too. Fanatics is a good example. Fanatics Markets runs on pricing from Crypto.com Derivatives North America, and it follows Fanatics buying Paragon Global Markets. It went live in 10 states at launch. A well-known sportsbook brand showing a partner’s contracts is the kind of setup these memos seem to aim at.
How Deals affect license suitability
Suitability means the regulator believes a company is fit to hold a license. Ohio, Nevada and Michigan all say an event contract deal can change that opinion. A company can be judged for what it offers itself or for who it works with. Money is part of the story too. Tens of millions of dollars have been traded on football games through Kalshi and Robinhood. With that much money moving around, regulators have a lot to watch.
Underdog and Arizona
Underdog shows what a bad outcome can look like. Underdog Predictions sits inside the main Underdog Sports app and is open in 24 states. It runs on the Crypto.com partnership. Arizona removed Underdog’s daily fantasy license over this. The state reportedly called the partnership illegal gambling. Underdog did not launch the product in Arizona, but the state had already warned that offering it elsewhere could bring action. Underdog later stopped its sportsbook business to focus on prediction markets and peer-to-peer pick’em contests.
Build a Sportsbook in Regulated Markets with Idea Usher
Adding a sportsbook or event contracts in a regulated market takes more than good code. Every state has its own rules and its own regulator. Idea Usher keeps these rules in mind from day one when we build the platform. Our team has 500,000 hours of coding experience. It also has ex-MAANG and FAANG developers who built big systems with heavy traffic and tight security. We use this experience to help you launch in the right state. Your existing license will not be harmed.
Jurisdiction-Specific Sportsbook Platforms
A platform that works in one state can break the rules in another. So we build each version to match the local license. Approved betting markets and age checks follow the local rules. Location checks and responsible gambling tools are part of it too. Your team can switch features on or off for each state. Nobody has to touch the rest of the system. If a regulator changes a rule, the platform can change easily.
Integrate Betting APIs and Compliance Controls
A sportsbook needs many outside services to run. We connect the odds feeds and the payment gateways. We also connect the identity check and geolocation tools. Every connection is kept secure so player data and money stay safe. The compliance controls are built into the platform. They are not added on top later. If a regulator asks, the reports and audit logs are ready.
- Odds and data feeds with fallback sources
- KYC and age verification
- Geofencing for state-by-state access
- Audit trails and regulator reports
Sportsbook Across Regulated Markets
On game day, a lot of traffic comes in all at once. Thousands of people can place bets at the same time. So we build the backend to stay fast even then. Because of this, you do not need to rebuild the product for every new state. Each market gets its own settings, but the core system is the same for all of them. We also plan for monitoring and updates early. When something changes, you do not have to shut down your business.
Conclusion
A state sportsbook license does not cover event contracts so you need a federal route such as a broker registration with a regulated exchange partner or your own exchange. Nevada has warned that offering event contracts without approval could hurt a license holder’s licensure even if the trading happens somewhere else. The safest plan is to pick the route that fits your budget, keep the product separate from your sportsbook, and check each state before you launch. If you want help choosing a route, talk to our team before you start
FAQs
A1: Usually no. Maryland’s regulator said a sports event contract on a federal exchange without a valid Maryland sports wagering license is illegal activity in the state. Nevada also warned that offering event contracts without its approval could hurt a license holder’s licensure even if the trading happens somewhere else. Your state license covers the sportsbook you run today and not a federal product. Treat event contracts as a separate product with its own approvals.
A2: Not always. You can partner with a regulated exchange and register as a broker instead of building an exchange. An introducing broker needs $45,000 in capital or none if an FCM backs it, while an FCM needs $1 million and an exchange needs $5 million or more. The NFA certifies brokers and FCMs while the CFTC approves exchanges. Most sportsbooks start with the broker route because it is cheaper and faster. Building an exchange only makes sense if you want what an exchange gives, which is full control of product design, pricing, and market data.
A3: It depends on the route. A technology vendor deal takes 1 to 3 months, an introducing broker 3 to 6 months, an FCM 6 to 12 months and an exchange 12 to 24 months or more. Court fights and slow reviews can stretch these dates. Sleeper first applied to the NFA in May and got approval in early January.
A4: Yes. Nevada said it will look at any license holder that offers event contracts or partners with a company that does when it decides if that holder is still suitable. Arizona told Underdog it planned to revoke its fantasy sports license over its Crypto.com partnership even though the product was never live there. That means a launch can put your existing license at risk. Tell your regulator about the plan before anything goes live.
A5: It depends on the order. In Washington, users can close or sell positions and can close accounts and withdraw funds. In Massachusetts, users can hold or settle old contracts but cannot add to them. Nevada went the other way when Crypto.com stopped holding open positions and stopped opening new contracts for residents. So build a way to switch off one market while still letting players exit.
A6: The price depends on the route. A white-label platform runs around $25,000 to $50,000 for setup, and a custom build costs $150,000 to $500,000 or more. Data, liquidity, and compliance add more on top, so get a quote for your own plan before you decide. One industry report put a data package of about 300 in-game lines at $4,000 to $6,000 a month, and custom upkeep runs 15 to 25 percent of the build cost each year.
