The Florida Gaming Compact faced a legal challenge on Wednesday that could result in prediction markets becoming Florida’s only legal form of regulated online gaming.
A group called Protect the Constitution LLC sued the Florida Gaming Control Commission over Hard Rock Bet’s availability across all of Florida. The lawsuit alleges that the tribal gaming compact that gave the Seminole tribe exclusive rights to offer mobile sports betting on and off reservation land in 2021 violates the Florida state constitution.
From the complaint for declaratory and injunctive relief, filed on April 23 (as first reported by Daniel Wallach via LinkedIn):
That implementing legislation violated Article X, Section 30 by authorizing sports betting throughout Florida without a citizens' initiative. When Floridians overwhelmingly voted in favor of adding Article X, Section 30 to the Constitution, they understood that it would give them the power to authorize sports betting. Indeed, the chairman of the voter committee that drafted and proposed the amendment repeatedly told voters it would give the people, and the people alone, the authority over sports betting.
Florida online sports betting challenged again
Under Florida Amendment 3, which became Article X, Section 30 of the state constitution through a 2018 vote, only Florida’s voters can approve new casino gambling. Some Amendment 3 proponents have argued that sports betting is a type of casino gambling. Sports betting attorney Daniel Wallach has argued that the Seminole’s right to offer mobile sports betting doesn’t violate Amendment 3.
However, mobile sports betting could run afoul of the Indian Gaming Regulatory Act (IGRA), which requires all tribal gambling to remain on the reservation. So far, legal challenges have been unsuccessful. The D.C. Circuit Court of Appeals upheld the hub-and-spoke model that allowed statewide mobile bets as long as the servers were located on tribal lands. And in June 2024, the U.S. Supreme Court denied a petition to review, maintaining the status quo.
A successful challenge could limit the Seminoles to in-person sports betting on-reservation but remove its mobile presence from the rest of Florida, which it offers exclusively through the Hard Rock Bet sportsbook app.
That outcome would be bad for the Seminole tribe but advantageous for federally regulated prediction markets.
Prediction markets stand to benefit
If the challenge succeeds and Florida’s Seminole tribe limits its sports betting offering to tribal lands, then prediction markets could become the only platforms where bettors can legally trade on sports outcomes in the rest of the state.
CFTC-regulated prediction market platforms like Kalshi and Crypto.com have brought sports event contracts to all 50 states. After several state gambling regulators sent cease-and-desist letters to remove these contracts from their states, Kalshi sued to keep them in Nevada, New Jersey, and Maryland.
Despite legal challenges, Kalshi has secured a partnership with Robinhood that gives 25 million new customers access to sports contracts. These customers span the whole country since Kalshi is regulated under federal finance law instead of state sports betting law. Consequently, Kalshi and other prediction markets would find themselves above Amendment 3 challenges due to federal preemption.
How prediction markets have responded to legal challenges
Kalshi has argued that state gambling regulators lack the ability to regulate Kalshi’s contracts since the prediction market platform is federally regulated by the CFTC. New Jersey countered that since the CFTC considered state gambling laws in its prohibition of event contracts involving gaming that state sports betting law should play a role in limiting sports contracts.
The judge in the Nevada case granted Kalshi a temporary restraining order, ruling that Kalshi showed a “likelihood of success on the merits” of its case.
The challenge to Florida sports betting could be the first state-level case that expands Kalshi’s customer base instead of attempting to shrink it. However, Kalshi’s sports contracts would only remain available as long as the CFTC and the courts refrain from prohibiting them.
