Sport and prediction markets betting

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 that the FBI  unveiled in back-to-back operations during 2025 that were part of multi-year investigations. As a result, 2025 has been widely characterized as a “turning point” for the U.S. sports betting industry due to a succession of significant and high-profile gambling scandals that exposed major vulnerabilities across professional and college sports. The sheer volume and severity of incidents across multiple professional and collegiate leagues led FBI Director Kash Patel to liken the illegal sports betting to insider trading, where the sportsbooks themselves were considered victims in this widespread fraud.

The FBI combats illegal gambling, which is estimated to be a $673.6 billion annual problem, primarily through the enforcement of criminal statutes, coordination with state and international partners, and a dedicated program to protect sports integrity which have “significant consequences” for the public, the economy, and the integrity of sports betting in the U.S  according to a warning on the IC3  website. 

Seventy percent of Americans think that the proliferation of streaming based sports betting is damaging the integrity of games with games being rigged by players to control the betting odds, commonly referred to as match-fixing, spot-fixing, or point-shaving often involving players, officials, or coaches colluding with gamblers to predetermine specific outcomes or events within a game for financial gain which are forms of competition manipulation in sports that are illegal in many jurisdictions according to a new NBC News Decision Desk Poll, powered by SurveyMonkey. 

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

Despite match-fixing, spot-fixing, and point-shaving, the intersection of legal mobile wagering, advanced edge cloud infrastructure, and AI has revolutionized the sports industry, transforming it into a highly interactive and data-driven digital economy. The focus has shifted from passive viewing to active participation, driven by personalized experiences and real-time data analysis. 

The industry’s shift to online streaming platforms was initially driven by sports leagues, whether it be the NBA, MLB, or NFL, seeking to engage younger audiences and offset falling TV ratings. Online platforms like Amazon, ESPN+, and Apple TV+ host major games, boosting engagement that allows leagues to distribute content directly to fans (direct-to-consumer models), offering more control over the broadcast experience, data collection, and content distribution globally using AI and edge cloud streaming technologies. 

These technologies revolutionized sports betting by enabling real-time, in-play wagering through low-latency feeds and mobile apps, creating immersive experiences with micro-bets on small game moments (like the next pitch), fostering deeper fan engagement via interactive stats and data, and integrating betting directly into content, turning passive viewers into active participants across any device, anywhere. This shift from broadcast to interactive platforms keeps fans captivated, extends betting windows, and drives 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 by leveraging federal oversight from the Commodity Futures Trading Commission (CFTC) to operate in all 50 states, including those 11 states where traditional sports betting is illegal. This approach allowed platforms like Kalshi, DraftKings, and FanDuel to tap into new markets and reportedly generate significant trading volumes by converging sports wagering with financial betting using AI, edge cloud streaming, and digital assets to offer enhanced user options and significant revenue potential.

In a major shift, Kalshi the first federally regulated prediction market exchange where users can buy and sell contracts based on the outcome of future events, such as sports, politics, and economic indicators in partnership with Coinbase and Robinhood began offering event contracts on sports (e.g., March Madness, NFL, Chicago Blackhawks), enabling users in all 50 states to place wagers on games as federally overseen financial derivatives, even in states where traditional sports betting remains illegal like California and Texas. Kalshi recently integrated with the world’s largest crypto exchange, Binance-backed BNB Smart Chain (BSC), allowing users to deposit and withdraw native BNB and major stablecoins — Tether (USDT) and USDC (USDC) — directly on the chain for prediction market trading, enabling faster, more direct crypto transactions without needing complex cross-chain bridges or fiat conversions.

In October 2025, Trump Media & Technology Group (TMTG), the parent company of his social media platform Truth Social, announced that it would launch its own prediction market, called “Truth Predict,” in partnership with Crypto.com. This platform will allow users to trade contracts on a wide range of events, including political elections, interest rates, and sports.

In November 2025, the Chicago Board of Exchange (CBOE) Global Markets, the world’s largest options exchange, announced that it plans to launch its own prediction markets and will explicitly focus on contracts tied to financial and economic events, avoiding sports-related products due to regulatory risks. And Polymarket, the world’s largest blockchain-based prediction market, with partners such as Yahoo Finance, TKO Group Holdings (UFC and Zuffa Boxing), X, CNN, and CNBC, announced a multi-year partnership with PrizePicks, a leading sports entertainment and daily fantasy sports operator, to facilitate a new federally regulated predictions market offering.

In December 2025, major sports betting operators Fanatics, DraftKings, and FanDuel all launched federally-regulated prediction market platforms, many in partnership with the Chicago Mercantile Exchange (CME), which is the world’s largest and most diverse derivatives marketplace for futures and options, handling massive volumes across interest rates, equities, FX, energy, and agriculture to access a national customer base in states where traditional sports betting remains illegal.

However, this rapid expansion is also causing audience fragmentation, technical difficulties, and potential exclusion of older fans. It has triggered significant legal challenges and a fierce debate with state-level gaming regulators. 

Individual taxation in the new tokenized streaming wagering economy

In 2025, the shift in sports betting and prediction markets to a direct-to-consumer (DTC) model via tokenized streaming with edge AI has created a complex and uncertain international tax landscape, primarily driven by the proliferation of Digital Services Taxes (DSTs) and the stalled multilateral tax negotiations. 

Trump’s 2025 “One Big Beautiful Bill Act” introduced significant changes to how bettors/gamblers are taxed, sparking debate over whether the law inadvertently punishes legal bettors, generating significant criticism from the gaming industry and lawmakers. 

“Phantom income” tax: Starting January 1, 2026, gamblers will only be able to deduct 90% of their losses against their winnings. This means a bettor who breaks even (e.g., wins $10,000 and loses $10,000) would still be taxed on a $1,000 “phantom profit.” Wagering with cryptocurrency involves specific risks and tax obligations in the U.S. due to the volatile nature of digital assets and their classification by the IRS as property established in IRS Notice 2014-21. Transactions can trigger two types of taxable events: ordinary income from the gambling winnings and capital gains or losses when the crypto is disposed of. 

Wagering/disposal of assets: When a gambler uses digital assets to place a bet, the IRS considers this a disposal or sale of the digital asset in exchange for a service (the wager). A capital gain or loss is realized based on the difference between the fair market value (FMV) of the digital asset at the time of the bet and the gambler’s original cost basis. Short-term (held one year or less) gains are taxed at ordinary income rates (up to 37%). Long-term (held more than one year) gains benefit from 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 by a gambler are considered taxable ordinary income. The amount of income is the FMV of the digital assets at the exact moment the gambler wins them. This income should be reported on Schedule 1 (Form 1040) or Schedule C if the gambler is a professional gambler.

Holding/selling winnings: If the value of the digital asset the gambler won appreciates (or depreciates) after he/she receives it and the gambler later sells, exchanges, or uses it for something else, this triggers a second taxable event: a capital gain or loss. The cost basis for these won assets is the FMV gambler reported as income when he/she originally received them. 

Taxpayers must maintain detailed records of all digital asset-based wagering transactions, including dates and fair market values, and answer the digital asset question and must report all income from taxable digital asset transactions on their federal income tax return, regardless of whether they received a payee statement like the new Form 1099-DA from the betting platform.