New York Faces Potential $13 Million Tax Loss as Prediction Markets Lure Sports Bettors

In the first quarter of 2026, New York’s mobile sports-betting apps generated roughly $328 million in tax revenue, accounting for about one-third of all U.S. state sportsbook tax collections. New prediction-market platforms such as Polymarket and Kalshi, which operate under federal derivatives regulations and face lower tax rates, are now offering sports contracts and pulling a modest share of bettors away from traditional sportsbooks.

DraftKings reports that only about 1% of its sportsbook customers also use Kalshi in states where betting is legal, yet the Tax Policy Center estimates that a 1% shift could reduce New York’s tax intake by $13 million. State officials, including Deputy Comptroller Maria Doulis, note the tax disparity despite similar user activities, while Governor Kathy Hochul has filed a lawsuit against Polymarket, citing threats to funding for schools and public services.

Both Kalshi and Polymarket point to a near-thirteen-fold increase in trading volume after adding sports contracts, and the state is also grappling with an 8.5% rise in gambling-helpline calls and doubled funding for problem-gambling programs. Volatility in sportsbook revenue, illustrated by the Knicks’ upset win that cost mobile sportsbooks $14.4 million, adds further uncertainty to the state’s fiscal outlook.