Interstate Horseracing Act Gives Racing Stronger Legal Shield Against Prediction Markets

Horse racing may be the best-protected form of wagering in America as prediction markets push into sports betting, according to a leading gaming law expert. Speaking at the Racing and Gaming Conference on Aug. 10 in Saratoga Springs, N.Y., attorney and consultant Bill Gotimer argued that pari-mutuel wagering on horse racing sits on firmer legal ground than other regulated gaming products currently being challenged by platforms like Kalshi and Polymarket.

The reason, Gotimer said, is the Interstate Horseracing Act of 1978 (IHA), a federal law that governs interstate commerce on pari-mutuel wagers and requires the approval of host racing associations and state regulators before any entity can accept action on a race.

Why the IHA Gives Racing an Edge

Prediction market operators have leaned on the Commodity Futures Trading Commission’s oversight, rooted in the Dodd-Frank Wall Street Reform and Consumer Protection Act, to argue that federal regulation preempts state-level gaming law. That argument has fueled rapid expansion into sports event contracts across the country. But Gotimer said the CFTC’s preemption case gets much harder when it runs into another federal statute — the IHA — rather than a state gaming law.

“It’s been around since 1978, and what it effectively does is it gives the racetracks and racehorse owners a seat at the table for any discussion as to who can accept wagering on their product,” Gotimer said. “It probably did not foresee prediction markets as we have now, but it did foresee the fact that [tracks and participants] had an economic stake in who could accept wagers.”

Gotimer added that, in his view, there is currently “a legal block on the prediction markets taking wagering action or ‘contract action’ on the outcome of races,” since one federal law generally cannot be preempted by another.

The Kentucky Derby Test Case

The panel’s discussion echoed a real-world skirmish from earlier this year. Attorney Kim Copp, who moderated the panel, noted that Polymarket briefly listed a market on this year’s Kentucky Derby before pulling it down after Churchill Downs Inc. objected. Gotimer said other prediction markets reportedly explored offering action on the Derby as well before backing away.

Churchill Downs has been explicit about its legal footing. The track’s ownership group has said pari-mutuel wagering operates under a different framework than other sports betting products, and that the IHA gives it what amounts to intellectual property rights over its racing content — meaning no platform can take wagers on its events without direct consent.

Where the Line Might Move

The panel wasn’t entirely dismissive of prediction markets finding a foothold in racing. Participants suggested platforms could still offer legally defensible propositions on outcomes not tied to a specific pari-mutuel pool, such as who wins an Eclipse Award or which jockey finishes the year as the leading money-earner. Some panelists even floated the idea that racing could eventually embrace such contracts if the sport received a financial cut.

Derril Jordan, an attorney representing Native American gaming interests, argued that tribal gaming enjoys similar federal protection and that prediction markets are infringing on it too — a notable alignment given that tribal gaming interests and state regulators have often been on opposite sides of legal fights. “I’ve spent most of the time fighting states, now I find myself cheering them on,” Jordan said.

Copp said she has tracked 45 active cases nationwide involving prediction markets suing states, states suing prediction markets, or the CFTC suing states directly — a sign the broader legal fight over event contracts is far from settled. Dan Ullman, a former 16-year CFTC staffer who now advises fintech and gaming clients, was asked whether states and the CFTC could find a regulatory middle ground for prediction markets. He declined to offer a solution. “If it were simple,” Ullman said, “there wouldn’t be so much litigation over it.”

What It Means for Bettors

For now, anyone looking to wager on horse racing outcomes is still working within the licensed pari-mutuel and advance deposit wagering system rather than through prediction market contracts. Bettors can compare the best horse racing betting apps for 2026, and those looking at other legal sports wagering options can browse the latest sportsbook promo codes while the prediction market legal battles play out in court.