$250B in losses: US regulation sorts bets by category, not risk

More than $250 billion in projected legal gambling losses in 2026, $11.4 billion extracted through crypto scams, billions of daily zero-day option contracts and $44 billion in prediction market volume: US regulators sort these activities by legal category rather than by the actual risk they impose on households.

The Great American Regulatory Paradox

A resident of a state where sports betting is illegal can nonetheless open a crypto prediction market app and take a position on whether the Federal Reserve cuts rates, whether a hurricane makes landfall in Florida, or which team wins the World Series. A trader with no view on economic fundamentals can buy an option that expires in six hours and is, both in theory and in practice, a wager on which direction a stock index moves before lunch. A teenager with a crypto wallet can invest in a token that exists purely because a meme went viral.

Each of these activities involves risking money on an uncertain outcome, yet each falls under a different regulator, a different legal standard, and in some cases, no meaningful oversight at all. The gap between what regulators call gambling and what they call investing has become one of the stranger features of American financial life.

Sports Betting Hits Historic Highs

The American Gaming Association (AGA) reported that commercial gaming revenue in the US hit a record $78.72 billion in 2025, up 9.2% year-over-year. Sports betting alone generated $16.96 billion in revenue on a total handle of $166.94 billion, an increase of nearly 23% in revenue and 11% in handle over 2024, when Americans had already wagered just under $150 billion legally on sports.

Since the Supreme Court’s 2018 ruling in Murphy v. NCAA struck down the federal prohibition on sports betting, 39 states and Washington, D.C. have legalized some form of it, and the industry has expanded every year since. But the AGA’s revenue figures do not capture the social cost of that growth.

« In states where sports betting is legal, an NFL home team’s upset loss raises the rate of intimate partner violence by 10 percentage points more than in states without legal betting. »

Joseph Politano, citing academic research

Work by New York Fed economists Jacob Goss and Daniel Mangrum, drawing on millions of credit reports, found that debt delinquency rates rose as states legalized sports gambling, with the effect concentrated among men and people under 40.

Prediction Markets and 0DTE Options: Same Bet, Two Doorways

Meanwhile, a set of markets that regulators do not classify as gambling at all has grown even faster in percentage terms. Data compiled by Gambling Insider put 2025 notional trading volume across major prediction market platforms at more than $44 billion, with Polymarket and Kalshi together accounting for roughly $38 billion to $39 billion of that total. Polymarket accounted for about $21.5 billion, and Kalshi for $17.1 billion, between January and November 2025.

Total US listed options volume topped 15.2 billion contracts in 2025, a sixth consecutive annual record and a 26% jump over 2024, according to Cboe’s year-end report. Zero-days-to-expiration (0DTE) contracts on the S&P 500 — options opened and closed within a single day — averaged 2.3 million contracts per day and made up 59% of total SPX volume, with retail traders responsible for roughly 50% to 60% of that flow.

The AGA estimates that prediction markets offering sports-related contracts have diverted more than $500 million in potential state and tribal betting tax revenue since the start of 2025. The fight has already produced a tangle of lawsuits and state enforcement actions in Nevada, Massachusetts, Arizona, and Tennessee, all testing whether federal derivatives law preempts state gambling statutes. The CFTC itself is split along generational lines: former Chairman Gary Gensler filed a brief in June siding with the AGA, while the current CFTC has sued states directly to assert exclusive jurisdiction over the same contracts.

The dispute has fractured the gambling industry itself. DraftKings and FanDuel both resigned from the AGA in November 2025, days before DraftKings launched its own federally regulated event-contract product. Within six months, that product had reached a $3.1 billion annualized trading run rate.

Crypto: $11.4 Billion Siphoned by Criminal Networks

Americans lost $11.4 billion to cryptocurrency scams in 2025, a 22% increase year-over-year, according to the FBI’s 2025 Internet Crime Report. The IC3 received approximately 453,000 cyber-enabled fraud complaints, with reported losses exceeding $17.7 billion. Investment fraud remained the primary driver, accounting for nearly 49% of all scam-related losses.

« Crypto-related complaints rose to 181,565 in 2025, with average losses of $62,604, and nearly 18,600 victims each losing more than $100,000. »

FBI, 2025 Internet Crime Report

Chainalysis released a report in January revealing that as much as $17 billion in crypto was lost worldwide to scams and frauds in 2025. Impersonation, crypto exchange impostors, and AI-generated scams against individuals have gradually surpassed losses to cyber-attacks as the leading methods criminals use to steal digital assets.

The FBI says most crypto scams are run by organized criminal groups in Southeast Asia that use human trafficking victims as forced labor to operate long-term, psychologically manipulative investment schemes. Americans over 60 reported approximately $7.7 billion in losses, up 37% from 2024.

A Human Cost No One Is Counting

The New York Fed’s work on credit delinquency following sports betting legalization found that, within the population of people who actually took up betting after legalization, credit delinquencies spiked by more than 10%. A separate study found that in states with legal online betting, bankruptcy rates rose 28% and debt collection amounts increased 8%, effects that emerged roughly two years after legalization.

The AGA tracks gaming revenue. The CFTC tracks derivatives volume. The SEC tracks securities activity. The FBI tracks crypto fraud complaints. But no single agency tracks the combined toll on American household balance sheets when all these channels feed losses simultaneously. No official figure aggregates legal gambling losses, crypto scams and 0DTE volumes in a single line item, even though these markets now overlap in the wallets of the same individual.

Toward a Risk-Based Regulatory Framework

Economists and gambling researchers who study these overlapping markets tend to argue that regulation should track the risk a product actually poses — leverage, time horizon, addiction potential, and the likelihood of catastrophic loss — rather than which legal bucket a product happens to fall into. Under that framework, a same-day options contract and a same-day sports bet would face similar scrutiny regardless of which regulator signs off on them, and a memecoin with 99% odds of losing most of its value within two months would not escape oversight simply because it is denominated in stablecoins rather than dollars.

As prediction markets begin listing political contracts, as crypto tokens track sporting outcomes, and as retail trading platforms gamify options products with the same interface design as a slot machine, the case for a coherent, risk-based regulatory framework grows harder to ignore. The question is no longer whether the current system is working — the numbers make that clear. The question is whether Washington has the appetite to rebuild it before the next wave of financial innovation arrives.

Sources

• CryptoSlate – Americans lost hundreds of billions on crypto speculation. Why is only some of it considered gambling?
• FBI – 2025 Internet Crime Report
• CoinDesk – Americans’ losses to crypto scams rose to over $11 billion last year, FBI reports
• FBI – Cryptocurrency and AI Scams Bilk Americans of Billions
• NPR – After states legalize sports betting, Americans see financial strain, studies show
• BoingBoing – Americans now lose a quarter of a trillion dollars a year gambling
• Investopedia – Zero-Day Options Had Their Best Month in May
• American Gaming Association – Commercial Gaming Revenue Hits $78.7 Billion in 2025
• Chainalysis – Crypto Crime Report 2025
• Cboe Global Markets – The State of the Options Industry 2025

This article is for informational and educational purposes only. It does not constitute investment advice. Do your own research (DYOR) before making any decision.