Prediction markets like Kalshi and Polymarket have leveraged a regulatory loophole to offer sports betting-style contracts across most U.S. states, including those without legalized sports betting. However, they have largely avoided horse racing due to its complex legal framework governed by the federal Interstate Horseracing Act (IHA), which grants the horse racing industry exclusive control over wagering rights. Unlike traditional sports betting regulated by states, horse racing wagering requires explicit consent from racetrack operators, who are prepared to legally challenge any prediction market attempting to offer contracts on races like the Kentucky Derby.

Despite this resistance, some industry analysts, including wagering consultant Michele Fischer, argue that horse racing should engage with prediction market operators rather than oppose them. Fischer suggests that collaboration could open new growth opportunities and attract broader audiences to the sport. The debate highlights a tension between protecting established legal rights and exploring innovative betting models to revitalize horse racing’s market presence.