Cboe KPI gap widens as sports dominate prediction market use

A survey published by S&P Global Market Intelligence in the third quarter of 2026 found that seventy percent of prediction market users had traded on sports-related outcomes over the past year. Economic and financial contracts drew thirty-six percent. Political outcomes, thirty-three. Those numbers tell you something about where the industry actually lives, as opposed to where its advocates say it is going.

The reporting from the DraftKings Louisiana hearing, the Google ad restrictions, the Underdog lawsuits across seven states — all of it is being framed as a regulatory clash over a new financial instrument that helps markets price uncertainty. That framing is doing a lot of work. The S&P data suggests the typical user is not pricing political uncertainty or hedging economic exposure. They are betting on the Chiefs covering.

I don't think the industry's legal strategy survives that gap indefinitely.

Kalshi and Underdog have built their federal preemption argument on CFTC jurisdiction over event contracts. The core claim is that these are commodity futures instruments regulated under federal law, which means state gaming authorities cannot touch them. That argument has real legal foundation. The CFTC's own rule, published this month, formally excluded licensed sportsbooks from the swap definition, which signals the agency is actively drawing lines around this space. The preemption logic is not frivolous.

But regulators in Nevada and Ohio have already pushed back — and the Ohio appeals court ruled against Kalshi before the rehearing request was filed. The legal theory and the court outcomes are not tracking together, and the S&P data explains why state regulators are not backing down. When seventy percent of your product's activity is indistinguishable from sports betting to the user sitting at the terminal, the argument that federal commodity law governs the transaction becomes harder to hold in a courtroom whose jurisdiction is state gaming law.

I should flag my own tendency here. I weight downside scenarios in regulatory cases more heavily than the base rate probably justifies, particularly after the 2022 experience where I underpriced political risk in a legal framework I thought I understood. I have adjusted for that. Even accounting for my bias, I do not think the preemption argument lands cleanly at the Supreme Court level while the usage data looks like this.

Google's decision to block prediction market advertising in five states is the mechanism worth watching. It is not a legal ruling. It is a commercial entity reading litigation risk and acting before a court tells it to. When a platform that size makes that call, it changes the cost structure for customer acquisition in the states that matter most for growth. Underdog has now sued seven states. Each lawsuit costs money. The ad channels are closing. The usage base is concentrated in sports. The federal preemption argument is losing in Ohio.