CNBC's Contessa Brewer reports on the growing interest in gambling.

California

Sweepstakes gaming, which allows players to use virtual coins or real money to play casino-style games and wager on sports, is facing increasing scrutiny across the United States. More than a dozen states have issued cease and desist letters, with six states enacting bans and eleven more considering similar legislation. In California, a bill to ban sweepstakes gaming has advanced, and the state's attorney general has issued an opinion labeling daily fantasy sports as illegal gambling, though this view is contested by the governor and industry representatives.

Meanwhile, prediction markets—platforms that let users trade contracts on event outcomes—are also under legal review. Companies like Cauchy argue these are not gambling and fall under federal regulation, but state attorneys general and major sports leagues have raised concerns about consumer protection and sports integrity. The Commodity Futures Trading Commission, which oversees these markets, is currently without a chair, adding further uncertainty to the regulatory landscape.

'Sweepstakes gaming' faces bans in states

In a world with no sure bets, it seems safe to say that the interest in gambling will keep growing. Contessa, the sweepstakes is back. Well, you know, look, we are watching the growth in the gambling landscape just morph and change around the United States. It's happening at a dramatic pace. With ways to wager that go way beyond a sportsbook or a slot machine. For instance, you have, Joe, the sweepstakes gaming where players use virtual coins, but they can also buy in with real money to play what looks like casino games and place wagers on sports. More than a dozen states have issued cease and desist letters. And most importantly, state legislatures are taking action. Six of them have now banned sweeps. Eleven have proposed legislation to ban them, with California just this week passing a bill out of committee to ban the games. And California Attorney General Rob Bonta has just issued opinion calling daily fantasy sports illegal gambling. The governor says he disagrees. And California Congressman Ro Khanna told me this week this is a boneheaded move by Bonta to ban fantasy. Quote, who doesn't have a fantasy team? I just don't get it. It's mind numbingly dumb politics, given the degree young men are ditching Democrats. That's kind of an aside. Then you've got prize picks, underdog, fan duel, draft kings, which all have daily fantasy in California. They point out to me that this is a non-binding opinion. So game on, at least for now. They're going to keep offering them. And this one really could be a game changer. The predictions markets, which is buying and selling contracts on the outcome of events, Crypto.com, Robin Hood, and especially Cauchy, which is spearheading these efforts, are pushing to offer trades on sports on the predictions platform. Now, predictions are regulated by the Commodity Futures Trading Commission, the CFTC. Cauchy insists these sport wagers are legal in every state because, one, they say it's not gambling. It's predictions. And the federal agency trumps states' rights to regulate gambling. We're now waiting on decisions from federal judges in New Jersey, in Nevada, in Maryland about whether these sports trades are allowed. Thirty four state attorneys general have joined an amicus brief, which joins the state of New Jersey trying to prevent Cauchy from operating in that state. The American Gaming Association insists this is a clear attempt to skirt state gambling laws without robust rules. Consumers get hurt, integrity in sports suffers, and the public loses confidence in both the games and the markets surrounding them. And by the way, both the NBA and the MLB have joined in this and said we don't want productions. We think it hurts sports integrity. But the CFTC is currently operating without a chair. Brian Contenz, who's on the board of Cauchy, has been nominated but not yet confirmed to head up that agency. And Donald Trump Jr. is a Cauchy advisor. Don't forget, I was talking earlier this week about the provision in the OBBB that would only allow gamblers to deduct 90 percent of their losses, 90 percent of their winnings. So you could actually be in a situation where you haven't made a profit, but you owe taxes anyway. And there's questions about whether this is going to force gamblers to offshore, lure them to offshore books. I actually think it benefits Cauchy and others who offer these wagers because their losses would be treated just like your stock trades. Profits and losses would be, you know. Because it's not a gambling loss, technically. What is it? What is it? It's an investment loss. Yeah, exactly.

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