New York Gaming Commission Threatens Licenses Over Prediction Markets

Vetting the License Holders

The most significant escalation is the Commission’s decision to reconsider the eligibility of existing gambling operators who choose to partner with prediction market platforms. Chairman Brian O’Dwyer announced that the regulator will investigate whether involvement in these markets renders a company “unfit” to hold a license in New York.

Under state law, gambling licensees must maintain “unblemished character and the utmost fitness.” The Commission is now questioning whether engagement with prediction markets, which it views as unregulated and potentially dangerous, violates this standard.

This specifically targets major sportsbook operators like DraftKings and FanDuel, who have signaled interest in entering the prediction space. The Commission’s legal counsel has been tasked with reviewing the issue and providing formal recommendations, essentially threatening to revoke access to the lucrative New York market for any operator that crosses this line.

Cease-and-Desist Orders and Public Condemnation

The regulatory push follows a cease-and-desist order sent in October to Kalshi, a federally regulated exchange. The NYSGC accused the platform of operating as an unlicensed mobile sportsbook. Kalshi responded by filing a lawsuit seeking an injunction against the Commission. Chairman O’Dwyer indicated that more cease-and-desist orders are “likely” as the state attempts to curb the availability of event contracts.

The Commission also issued a sharp condemnation of specific betting markets, particularly those involving political figures. O’Dwyer highlighted a contract on a prediction market that allowed users to bet on whether Zohran Mamdani, an incoming mayoral candidate, would be deported.

He labeled the wager “racist” and “unfunny,” warning that such “ad hominem” bets pose risks to public officials and society. The Commission argues that these platforms lack necessary safeguards for minors and problem gamblers, positioning them as a threat to the state’s regulatory authority.

The ORACLE Act: A Legislative Firewall

Parallel to the regulatory crackdown, the state legislature is considering Assembly Bill 9251, known as the ORACLE Act (Oversight and Regulation of Activity for Contracts Linked to Events). Introduced by Assembly Member Clyde Vanel, this bill aims to codify strict prohibitions on prediction markets.

The ORACLE Act proposes to ban New York users from accessing speculative contracts on a wide range of “sensitive” topics. These include:

• Political Markets: Bets on elections or government actions.

• Crisis Events: Contracts related to disasters, deaths, terrorism, or public health emergencies.

• Financial Markets: Wagers linked to the stock prices of public companies.

• Sports Props: A ban on specific in-game event wagers, though bets on overall tournament outcomes (like an NBA Championship winner) would remain permissible.

The bill also includes a “poison pill” provision designed to keep major sportsbooks out of the market. It prohibits prediction platforms from using any entity that “knowingly engages in gambling activity as a distinct business” as a market maker or liquidity provider. This effectively blocks licensed sportsbooks from providing the backend infrastructure for these exchanges.

If passed, the ORACLE Act would empower the Attorney General to impose severe financial penalties. Standard violations could incur fines of up to $10,000, but platforms that ignore a court order to cease operations could face a daily fine of $1 million. This legislative effort sets up a potential jurisdictional clash, as platforms like Kalshi and Polymarket maintain they are commodities exchanges regulated solely by the federal Commodity Futures Trading Commission (CFTC).