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The ongoing expansion of prediction markets as a gambling alternative should continue to be one of the most dominant trends in the industry, both in the United States and abroad. The rise of companies such as Polymarket and Kalshi that now offer contracts on sporting events in addition to entertainment options, political markets, and other financial indicators has reshaped the space and attracted new market entrants, including entrenched gaming powers. The arrival of FanDuel and DraftKings, FanDuel through a partnership with CME Group and DraftKings through its acquisition of Railbird Exchange and launch of DraftKings Predictions comes with a whole new array of questions, most notably the reaction from state regulators who have tried to steer regulated gaming operators away from the prediction space.

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Pending court battles will also dominate the conversation, as both sides seek legal clarity on the types of contracts that pass muster under federal law. Favorable rulings for the prediction industry, and a continued hands-off approach from federal regulators, could radically re-shape the regulated gaming space, while a favorable ruling for regulators could restore the status quo and leave some in the space vulnerable to potential enforcement actions. Those in the regulated space are faced with a difficult choice – risk the wrath of regulators and other law enforcement officials, or risk being left behind as competitors establish a presence in all 50 U.S. states that may not be able to be usurped later.

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While prediction markets may be on the way up, the once-burgeoning sweepstakes industry took several major hits in 2025 as several states, including major prizes such as California and New York, passed legislation to curtail the popular dual-currency model of sweepstakes gaming, and forced companies to rethink their gameplan in the state.

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2026 will give more clarity whether the bad year for sweepstakes was a blip and something the industry can weather, or whether it was simply the first wave as more states follow suit in enacting their own legislation or pursuing enforcement actions. Operators, as well as suppliers of sweepstakes services such as payment processors and game providers, should remain mindful of legislative developments and keep tabs on what specific prohibitions states enact, as each state may take a different path in their attempts to curtail the activity.

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Sweepstakes on the Line Between Innovation and Offence

In the gambling sector, generalisations rarely hold true. While jurisdictions often share the same underlying principles, each tends to apply them differently. Yet, we have witnessed a general tightening of gambling regulations and/or stricter regulatory enforcement.

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What explains this renewed vigilance? Gambling has long carried a negative connotation. Absolute prohibition, however, has proven ineffective: it neither eliminates risks nor prevents the rise of parallel markets. As a result, several countries have opted to regulate the sector, allowing, for the first time, a clear understanding of its true scale.

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Ironically, this visibility has prompted a new wave of restrictions as regulators attempt to regain control in ways that sometimes undermine the values they (rightly so) aim to protect. Against this backdrop, gambling operators, including licensed ones, now find themselves navigating a fragmented landscape across jurisdictions, are seeking ways to keep their offers attractive, competitive and profitable.

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In this environment sweepstakes are gaining momentum as a gambling-adjacent model: a creative alternative potentially excluded from the legal framework of regulated gambling. This phenomenon reflects a potentially problematic effect of overly restrictive regimes: a rise in innovative solutions operating at the margins of what regulators can, or are empowered to, supervise.

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Sweepstakes are based on a model in which the award of a prize – monetary or in kind – does not depend, at least directly, on the payment of a monetary stake. In doing so, they remove a key feature of of games of chance and often escape regulatory control.

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Traditionally popular in the United States, this format has been drawing significant interest across Europe. But this raises a crucial question: where do we draw the line between mere entertainment and gambling? This prompts a renewed debate around games and platforms that incorporate gamification mechanics, where users sometimes spend significant amounts of money, either in the hope of obtaining a reward or simply for the virtual experience. The addictive potential of these mechanics is not significantly different from that of traditional gambling. Yet, these are highly valued experiences, particularly among millennials and Generation Z, thriving in a space that remains largely unregulated.

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This trend suggests that traditional gambling may be evolving, or perhaps migrating, into more fluid, hybrid and hard-to-classify formats. Consequently, regulation becomes more complex. With no clear legal boundaries, consumers remain vulnerable — and the old question returns: where does skill end and chance begin? In a context where many skill-based games are designed to maximise player engagement and spending, can this line still be clearly drawn? And if it blurs, where does the regulated market – and with it, enhanced consumer protection – cease to exist?

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Sweepstakes, related modalities and modern skill-based games may embody both an opportunity for innovation and a risk of industry tension. In either case, they demand urgent discussion involving legislators, regulators, operators and legal advisors. It is precisely within this grey area that the future of gambling may be taking shape.