Sports Betting and Prediction Markets

The global tokenization market size reached approximately $1.24 trillion in 2025, a significant increase from $865.54 billion in 2024, with projections for multi-trillion-dollar growth by the end of the decade. This growth was primarily driven by regulatory clarity in key jurisdictions. This is Part Four of a four-part series where I evaluate how tokenized edge cloud streaming and AI are transforming sports and prediction markets betting, which is a rapidly developing immersive experience. Part One: 2025 was the year of tokenization. Part Two focuses on energy requirements to support the growth in AI-driven tokenization, necessitating orbital cloud data centers. Part Three is about tokenization and AI technology developments in Hollywood and the film industry during 2025.

How tokenized edge cloud streaming and AI are transforming immersive sports and prediction markets betting

During 2025, the rapid expansion of the U.S. sports betting market has created a complex landscape of state-specific regulations. While 31 states and D.C. now offer mobile access, those in the 11 prohibited states must remain aware of local legal boundaries.

Lurking in the shadows of this expansion is what the FBI Director Kash Patel called “mind-boggling” sports betting and sports rigging schemes of historic proportions, unveiled during 2025 as part of multi-year investigations. The FBI emphasized that this year’s series of investigations has characterized 2025 as a “turning point” for the U.S. sports betting industry, exposing major vulnerabilities across professional and college sports.

The FBI combats illegal gambling, which is estimated to be a $673.6 billion annual problem, through criminal statutes, partnerships with state and international bodies, and a focus on protecting sports integrity. This issue poses significant implications for the public and economic health associated with the U.S. sports betting landscape according to the IC3 website’s warnings.

Seventy percent of Americans believe that the rise of streaming-based sports betting is undermining the integrity of games, with escalating incidents of match-fixing and point-shaving often involving collusion among players, officials, or coaches according to a recent NBC News Decision Desk Poll powered by SurveyMonkey.

How AI and cloud edge streaming tech are used in sports betting

Despite ongoing issues like match-fixing, the integration of legal mobile wagering, advanced edge cloud infrastructure, and AI has transformed the sports industry into an interactive, data-driven economic environment. The focus has shifted from passive consumption to active participation, enabled by personalized experiences and real-time data analytics.

The industry’s pivot towards online streaming emerged as sports leagues, including the NBA, MLB, and NFL sought to engage younger audiences, particularly as traditional TV viewership declined. Platforms like Amazon, ESPN+, and Apple TV+ have significantly ramped up engagement by allowing leagues to provide content directly to fans. These direct-to-consumer models enhance control over the broadcast experience, data collection, and global content distribution, all utilizing AI and edge cloud streaming technologies.

These advancements have revolutionized sports betting, enabling real-time in-game wagering through low-latency feeds and mobile apps. This has led to immersive experiences characterized by micro-bets on specific game moments, enriching fan interaction via dynamic statistics and datasets. By integrating betting directly into content, the passive viewership paradigm is evolving, enhancing engagement and opening up new revenue streams for leagues and operators.

Opinion: Hollywood Selva

How major sports betting operators are launching crypto-integrated prediction markets

The 2025 landscape for U.S. prediction markets expanded rapidly, leveraging federal oversight from the Commodity Futures Trading Commission (CFTC) to operate in all 50 states, including those where traditional sports betting is illegal. Platforms like Kalshi, DraftKings, and FanDuel have tapped into new markets, achieving substantial trading volumes by integrating sports wagering with financial prediction markets, facilitated by AI, edge cloud streaming, and digital assets.

Kalshi, the first federally regulated prediction market exchange, enables users to trade contracts based on future outcomes ranging from sports events to economic indicators, partnering with Coinbase and Robinhood to facilitate these transactions. This innovative approach allows users to engage in event contracts even in states with prohibitive sports betting laws. Furthermore, Kalshi’s recent integration with Binance has enabled faster, direct crypto transactions to enhance the trading experience.

In October 2025, Trump Media & Technology Group (TMTG) unveiled plans to launch a prediction market named “Truth Predict” in partnership with Crypto.com. This platform aims to allow users to trade on events encompassing everything from sporting outcomes to political elections.

In November 2025, the Chicago Board of Exchange (CBOE) Global Markets announced its intent to create prediction markets focused on financial and economic events. Meanwhile, Polymarket collaboratively partnered with several high-profile organizations, including Yahoo Finance and UFC to establish federally regulated prediction markets offering varied event contracts.

December 2025 saw significant developments as major sports betting operators like Fanatics, DraftKings, and FanDuel launched federally regulated prediction market platforms, often in collaboration with the Chicago Mercantile Exchange (CME), accessing new customer bases in states where traditional sports betting is banned.

However, this rapid expansion has also led to audience fragmentation, technical challenges, and concerns regarding the exclusion of older fans, inciting an intense dialogue among state gaming regulators.

Individual taxation in the new tokenized streaming wagering economy

In 2025, the evolution of sports betting and prediction markets towards a direct-to-consumer (DTC) model using tokenized streaming with edge AI has created a complex and ambiguous international tax landscape. This is primarily influenced by the increase of Digital Services Taxes (DSTs) and stalled multilateral tax negotiations.

Trump’s 2025 “One Big Beautiful Bill Act” implemented significant changes to how bettors are taxed, resulting in debate over whether the law inadvertently penalizes legal bettors, receiving backlash from the gaming sector and lawmakers alike.

“Phantom income” tax: Beginning January 1, 2026, gamblers will only be able to deduct 90% of their losses against their winnings. This reform implies that a bettor experiencing a break-even situation (winning $10,000 and losing the same amount) would still face tax liabilities on a $1,000 “phantom profit.” Wagering with cryptocurrency introduces unique risks and tax responsibilities in the U.S. due to the highly volatile nature of digital assets and their classification by the IRS as property, as established in IRS Notice 2014-21. Such transactions can lead to two types of taxable events: ordinary income from gambling winnings and capital gains or losses when crypto is disposed of.

Wagering/disposal of assets: When a gambler places a bet utilizing digital assets, the IRS considers this a sale or disposal in exchange for a service (the wager). A capital gain or loss is determined based on the difference between the fair market value (FMV) of the digital asset at the time of the wager and the gambler’s original cost basis. Short-term gains (held for one year or less) are taxed at ordinary income rates (up to 37%), while long-term gains (held for over a year) are subject to preferential capital gains rates (0%, 15%, or 20%). Capital transactions are primarily reported on Form 8949 and Schedule D (Form 1040).

Receiving winnings: Winnings received in digital assets qualify as taxable ordinary income. The income amount corresponds to the FMV of the digital assets when won. Gamblers should report this income on Schedule 1 (Form 1040) or Schedule C if they qualify as professional gamblers.

Holding/selling winnings: Should the value of digital assets won appreciate (or depreciate) post-receipt and the gambler sells, exchanges, or otherwise utilizers them, this action triggers a second taxable event: a capital gain or loss. The asset’s cost basis aligns with the FMV reported as income upon receipt.

Taxpayers are urged to maintain detailed records of all digital asset-based wagering transactions, noting dates, fair market values, and answering the digital asset question to ensure full compliance in reporting all income from taxable digital asset transactions on their federal income tax return.