The Kentucky Derby, a marquee horse racing event, attracts massive betting volumes, with last year’s wagering hitting record highs. However, federally regulated prediction markets like Kalshi, DraftKings Predictions, and FanDuel Predicts have notably avoided offering contracts on horse racing events, including the Derby. This reluctance largely stems from the Interstate Horseracing Act (IHA), which grants tracks like Churchill Downs Inc. control over wagering rights and requires their explicit consent for any betting activity on their races. Churchill Downs CEO Bill Carstanjen has emphasized that this legal framework, combined with the company’s satisfaction with current distribution methods, makes prediction markets unlikely to disrupt the traditional pari-mutuel wagering system in horse racing anytime soon.

Additionally, prediction markets face complex legal risks and limited incentives to challenge existing laws, especially given horse racing’s declining betting volume compared to other sports. The IHA also underscores state authority over gambling forms and mandates cooperation among states for interstate wagering, further complicating prediction markets’ entry. While prediction markets have become significant competitors in other sports betting arenas, their involvement in horse racing remains minimal due to these regulatory and business hurdles. For now, horse racing stakeholders feel relatively insulated from the prediction market threat, though the evolving legal landscape and industry dynamics could prompt future changes.