The second half of 2025 involved significant legal and regulatory activity across fantasy sports, event contracts, sweepstakes casinos and sports betting. The period was marked by a steady stream of new rulings, enforcement actions and legislative initiatives that added further layers to an already unsettled landscape. As agencies and courts applied existing laws to complex, fast‑evolving business models, operators and suppliers confronted a regulatory environment that remained fragmented and uncertain.
Below, we outline several of the most significant legal developments and enforcement trends that shaped the gaming industry between July 1 and December 31, 2025.
Fantasy Sports’ Newest Identity Crisis
Fantasy sports operate within a complex patchwork of state laws—some states have adopted clear regulatory frameworks and others permit the activity without specific rules, while a handful continue to prohibit fantasy sports altogether.
Traditional fantasy sports have long been a fixture in the gaming landscape, centered on season‑long contests in which contestants build and manage teams over time. The emergence of daily fantasy sports (DFS) in the early 2000s brought shorter, faster‑paced competitions, which have since evolved into “pick’em” or DFS 2.0 formats. In these newer versions, participants wager against the house by making over/under selections across multiple statistical categories, with payouts determined by multiplying the entry fee and increasing with each correct pick.
As these formats proliferate and state approaches continue to diverge, the legal status of fantasy sports—and especially pick’em contests—remains unsettled. This evolving landscape set the stage for significant developments in the second half of 2025. The principal development in the latter half of 2025 was California Attorney General Rob Bonta’s official legal opinion proclaiming that both daily fantasy sports and DFS 2.0 contests violate California law.
On July 3, 2025, California Attorney General Rob Bonta issued a formal opinion concluding that DFS—including both traditional draft-style and pick’em formats—violates California law. The opinion centers on Penal Code Section 337a(a)(6), which prohibits betting on the outcome of any contest of skill, speed or endurance. The Attorney General reasoned that both pick’em and draft-style DFS involve participants risking money on the performance of third-party athletes in real-world sporting events and thus fall within the statutory definition of illegal sports wagering—regardless of whether skill or chance predominates,1 saying, “We conclude that daily fantasy sports games constitute sports wagering and therefore violate section 337a.”
The opinion draws a sharp distinction between participating in a contest and wagering on the performance of others, emphasizing that both DFS formats amount to bets on sporting events, which are expressly prohibited. The Attorney General further found that these games closely resemble traditional sports betting, including proposition and parlay wagers, and rejected arguments that the predominance of skill should exempt DFS from the statute. Notably, the opinion clarifies that Section 337a applies even if skill is a significant factor, as the law prohibits betting on uncertain future events regardless of how outcomes are determined.
While the opinion stops short of addressing California’s lottery prohibition—citing the need for a fact-intensive analysis—it has already prompted follow-up litigation and heightened regulatory scrutiny. In June 2025, Underdog Fantasy—represented by WilmerHale—filed suit seeking to block Attorney General Bonta from issuing a formal opinion on the legality of daily fantasy sports, arguing that the Attorney General lacked statutory authority to opine on the issue at all. The challenge was filed before the opinion was released and framed the impending guidance itself as an unlawful act that would coercively reshape the market despite carrying no independent force of law. Although the court denied emergency relief and allowed the opinion to issue, the case underscored industry concerns that advisory opinions may function as de facto regulation in the absence of legislative action.
Event Contracts: Courts Continue to Grapple With Gaming and Event Contracts, and a New CFTC Chair Enters the Fray
Event‑based contracts—financial instruments whose payouts turn on real‑world outcomes—remain at the center of a rapidly evolving battle over where derivatives regulation ends and gaming law begins. Over the past year, platforms regulated by the Commodity Futures Trading Commission (CFTC or Commission) have expanded into sports‑contingent markets, prompting renewed scrutiny from state regulators and setting off a new wave of federal preemption litigation. At the same time, major market participants—including platforms newly entering this space—are taking increasingly proactive steps to secure nationwide regulatory clarity.
State Enforcement and Injunction Battles
State gaming regulators continue to challenge sports‑based event contracts, issuing cease‑and‑desist letters and asserting that these instruments constitute unlicensed sports wagering. Currently, federal courts remain divided.
District courts in Nevada and New Jersey granted temporary restraining orders against state regulators, determining that CFTC jurisdiction preempts state enforcement over event-based contracts on CFTC-regulated platforms.2 A district court in Maryland reached the opposite conclusion, ruling that the Commodity Exchange Act and the amendments to the law under the 2010 Dodd-Frank Act that enable the CFTC to prohibit event contracts “contrary to the public interest” do not preempt long-standing state gaming laws.3 Federal courts in Connecticut, New York and Ohio have yet to issue rulings on similar actions.4
Later in the year, a Nevada federal judge reversed his two prior preliminary injunctions, finding that the contracts offered were “sports wagers” rather than CFTC-regulated financial instruments. In the opinions, the judge stated that sports-based event contracts are not “swaps” within the CFTC’s exclusive jurisdiction because they are based on the outcomes of sporting events and do not involve events or contingencies “inherently joined or connected” with potential financial consequences.5 These cases are currently pending appeal and could ultimately require resolution by the US Supreme Court.
Most recently, Massachusetts joined the debate in a case that featured a different procedural posture. Rather than a prediction‑market operator suing in federal court to enjoin state enforcement, the Massachusetts Attorney General brought an enforcement action in state court, alleging that Kalshi was offering de facto sports wagering without the required state license. In January 2026, the Superior Court granted the commonwealth’s motion for a preliminary injunction prohibiting Kalshi from offering sports‑related event contracts in Massachusetts absent licensure under the state’s Sports Wagering Law and denied Kalshi’s motion to dismiss, rejecting Kalshi’s federal preemption arguments.6 In doing so, the court emphasized the presumption against preemption in an area of traditional state police power and concluded that state licensure requirements can operate alongside the federal derivatives regime, while also pointing to Kalshi’s sportsbook‑like product design and marketing as reinforcing the commonwealth’s characterization of the offerings as sports wagering.7
At the same time, there are several putative class actions against CFTC-regulated platforms offering sports-based event contracts.8 The class actions allege that sports-based event contracts offered on CFTC-regulated platforms violate state and federal gaming laws, and they seek declaratory and injunctive relief, including money damages and disgorgement. The class actions are still in their earliest stages.
Regulatory Outlook
On December 22, 2025, the US Senate confirmed Michael Selig, and he was sworn in as the new Chair of the CFTC, succeeding Acting Chair Caroline Pham. During the confirmation process, Selig signaled a cautious, “light‑touch” approach to event contracts and prediction markets, emphasizing deference to the courts on unsettled questions such as the permissibility of sports‑related and other outcome‑based derivatives and cautioning against near‑term regulatory intervention absent clearer statutory direction. He suggested that core ambiguities—particularly the line between regulated event contracts and prohibited gaming—might be more appropriately resolved through judicial interpretation or congressional action.
By late January 2026, Selig had moved to more actively shape the regulatory trajectory for event contracts. In a public address, he announced that he had directed CFTC staff to withdraw the Commission’s 2024 proposed rule that would have prohibited political and sports‑related event contracts, as well as a 2025 staff advisory discouraging registrants from offering sports‑related contracts due to ongoing litigation, explaining that those measures had contributed to market uncertainty. At the same time, Selig instructed staff to begin drafting a new event contracts rulemaking intended to replace what he characterized as a framework that has “proven difficult to apply,” with the stated goal of establishing clearer, more usable standards for market participants. He also directed staff to reassess the Commission’s participation in pending federal court matters implicating the CFTC’s jurisdiction over event‑based derivatives and to engage with the Securities and Exchange Commission on a joint interpretation of Title VII definitions to better delineate the boundary between commodity and securities‑based products.
Sweepstakes: Is the Party Coming to an End?
Building on the heightened scrutiny seen earlier in 2025, the environment for sweepstakes casinos, their suppliers and investors grew even more uncertain in the second half of the year. Rapid legislative changes and increasingly assertive regulatory enforcement made the legal landscape especially volatile, with new laws and actions emerging across multiple states.
In recent months, a growing number of states have moved to restrict or ban dual-currency “sweepstakes casinos.” Most notably, New York enacted Senate Bill S5935 on December 5, immediately prohibiting platforms that use dual-currency systems to mimic casino gaming or sports wagering.9 The law’s reach is broad, extending enforcement not only to operators but also to technology providers, payment processors, financial institutions, media affiliates and geolocation vendors. Violations can result in steep fines, loss of gaming licenses and future ineligibility. This legislative action followed a wave of cease-and-desist letters from the New York Attorney General, prompting many operators to exit the state before enforcement began.10
On October 14, California Governor Gavin Newsom signed into law Assembly Bill 831, which went into effect on January 1, 2026.11 Like the New York legislation, California’s new law outlaws online sweepstakes casinos that use dual-currency systems and prohibits not only operators but also their suppliers. Comparable legislative initiatives have been enacted in Connecticut, New Jersey Nevada and Montana (in the first half of 2025).12
A central issue in 2026 will be whether this trend continues. Sweepstakes-related legislation is pending in several states, and efforts to regulate this space will likely be revived instates where legislation stalled or failed in 2025, especially on the heels of the successful legislative efforts in New York and California.
In addition to legislative efforts, enforcement agencies are implementing robust measures focused on technical and consumer protection concerns. On December 29, Tennessee Attorney General Jonathan Skrmetti announced that his office issued cease-and-desist letters to 38 sweepstakes casinos, stating that the “promotional sweepstakes model used by these casinos constitutes an illegal lottery prohibited by the Tennessee Constitution and violates Tennessee gambling and consumer-protection laws.”13 In Maryland, proposed legislation to ban sweepstakes gaming stalled, but in keeping with its trend from the first half of 2025, the Maryland Lottery and Gaming Control Agency issued numerous cease-and-desist notices to unlicensed gaming operators in the second half of the year, noting that the operators’ offerings “contain the elements of gaming: consideration, chance and prize; in other words, it is gaming.”14 Regulatory authorities in Minnesota15 and Arizona16 have taken similar actions against sweepstakes operators.
On the litigation front, we saw the first governmental legal challenge against a sweepstakes casino in August 2025 with the Los Angeles City Attorney’s civil enforcement suit against Stake.us and more than 20 affiliated entities.17 The complaint alleges that Stake.us operates as a mirror image of Stakes.com, its real-money online casino counterpart, but uses a dual‑currency sweepstakes model in an attempt to evade California’s anti-gambling laws. Under Stake.us’s dual-currency system, players can purchase “Gold Coins,” which have no monetary value but can be used for additional gameplay, and in connection with that purchase they receive “Stake Cash,” which may be redeemed for gift cards or cryptocurrency. Players can then wager either currency type in casino-style games on Stake.us. The Los Angeles City Attorney alleges that the dual-currency model is a “transparent attempt to mask real money gaming” functions as “quintessential gambling”18 despite being marketed as a “social casino.” Notably, in addition to Stake.us and its founders, the complaint names gaming suppliers and vendors as defendants to the suit, alleging they aided and abetted the running of an illegal online gambling enterprise. The suit seeks injunctive relief, restitution and civil penalties for violations of California’s Unfair Competition Law and False Advertising Law, as well as the Unlawful Internet Gambling Enforcement Act (UIGEA). Although similar to other lawsuits against sweepstakes gaming operators, this suit could serve as a precedent‑setting test of third‑party liability in California.
The sweepstakes casino industry contracted sharply in 2025, as new legislation, aggressive enforcement and high-profile litigation forced many operators and suppliers out of key markets. We expect this issue will remain in focus in the first half of 2026. While this increased focus may eventually bring clarity, for now the regulatory regime governing sweepstakes remains complex and subject to heightened scrutiny. Staying informed of these fast-moving developments is essential for anyone involved in sweepstakes operations.
AML
Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance remained a top priority for gaming companies in 2025, driven by heightened regulatory expectations and enforcement activity at both the federal and state levels.
At the federal level, most US casinos—including commercial casinos, tribal casinos, gaming establishments and cardrooms—are classified as “financial institutions” under the BSA.As a result, they are subject to comprehensive BSA reporting, recordkeeping and AML/CFT (countering the financing of terrorism) program obligations similar to those of banks, money services businesses and other regulated entities. The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) administers and enforces these requirements, conducts examinations, issues guidance, and brings enforcement actions to ensure gaming operators maintain effective, risk‑based controls.
In addition to federal oversight, states may impose their own AML‑related requirements, many of which are more restrictive or operationally demanding than federal standards. State gaming regulations commonly require licensees to demonstrate good character, honesty and integrity and to avoid activities or associations that could undermine the state’s gaming industry or regulatory framework.19 In 2025, state regulators—particularly the Nevada Gaming Control Board (NGCB) and Nevada Gaming Commission (NGC)—actively leveraged this authority, scrutinizing several major operators and imposing significant penalties for compliance failures and conduct deemed inconsistent with regulatory expectations.
FinCEN Modernization Push
Ina September 2025 statement before the House Committee on Financial Services, FinCEN Director Andrea Gacki signaled that there is an “urgent need” to modernize the AML,CFT and BSA regimes.20 Director Gacki emphasized the importance of a risk‑based approach that enables institutions—including casinos and their banking partners—to focus resources on higher‑risk customers and activities rather than lower‑risk ones. Proposed changes include streamlining suspicious activity report (SAR) and currency transaction report reporting and improving reporting forms to reduce compliance burdens and focus resources on the most significant threats. Casinos, which filed thousands of SARs as part of the 4.6 million reports FinCEN received in 2023, will be directly impacted by these reforms—and banks servicing gaming clients will need to align their own BSA/AML programs accordingly.
FinCEN Designates 10 Mexican Casinos as “Primary Money Laundering Concern”
In November 2025, FinCEN issued a Notice of Proposed Rulemaking (NPRM) designating 10 Mexican gambling establishments as a “primary money laundering concern” after determining that their leadership facilitated money laundering on behalf of the Sinaloa Cartel.21 Acting under Section 311 of the USA PATRIOT Act, FinCEN proposed a special measure that would sever these casinos’ access to the US financial system by prohibiting US financial institutions from processing transactions involving them. FinCEN underscored that this action was necessary to disrupt illicit revenue streams supporting cartel operations and to mitigate the national‑security risks posed by cross‑border narcotics‑related money laundering. While the NPRM did not impose new SAR requirements, FinCEN advised institutions to consider the designation when evaluating related activity.
Nevada Enforcement Wave
Nevada regulators intensified their AML oversight in 2025, launching one of the most significant enforcement waves in recent history. The NGCB and the NGC issued nearly $27 million in penalties across several major Las Vegas–based operators, citing recurring failures to identify and respond to high‑risk patrons and adequately verify sources of funds.
The most recent action, approved in November 2025, imposed a multimillion‑dollar fine on a major Strip operator for long-standing breakdowns in AML controls, including allowing a known high‑risk patron to gamble freely for years despite internal red flags and industry‑wide bans. The NGC described these practices as negligent and emphasized the importance of robust escalations when customer activity is inconsistent with expected financial profiles.
Earlier in 2025, another leading Las Vegas property agreed to an eight‑figure settlement resolving allegations that it permitted high‑risk individuals—some later convicted of illegal bookmaking—to wager substantial sums without adequate due diligence. According to the NGC’s complaint, these issues occurred across multiple years and reflected systemic weaknesses in monitoring, host practices and verification of international customers.
Regulators also brought an action in mid‑2025 against a prominent luxury resort, resulting in a $5.5 million settlement tied to failures in its AML program and its handling of foreign patrons using unregistered agents to move funds. The operator entered into a stipulation requiring enhanced internal controls, expanded training and strengthened audit oversight.
Collectively, these cases signaled a clear regulatory priority: Nevada expects gaming companies to maintain rigorous source‑of‑funds and source‑of‑wealth processes, promptly escalate red flags, and address patterns of high‑risk play across properties. Enforcement actions throughout 2025 reflected increasing intolerance for weak AML governance and a renewed focus on operator accountability.
Enforcement and Offshore Gambling Crackdown
State attorneys general urged the Department of Justice to pursue aggressive enforcement against illegal offshore gambling operators under UIGEA, including injunctive relief, asset seizures and cooperation with payment processors to block unlawful transactions. Visa and Mastercard have pledged vigilance, signaling a coordinated effort to cut off illegal operators from the US financial system. For financial institutions, this means heightened scrutiny of payment flows tied to gaming and potential exposure under Regulation GG and similar state laws. Banks should expect continued pressure to monitor and block transactions linked to unlicensed gaming operators.
American Gaming Association Compliance Guide
The American Gaming Association released its first major update to its AML Best Practices for Anti-Money Laundering Compliance Guide since 2022, expanding guidance on digital wallets, online gaming, cryptocurrency transactions and enhanced customer due diligence.22 These updates reflect the industry’s shift toward risk-based monitoring and advanced analytics.
Conclusion
The legal and regulatory landscape as it relates to gaming only became more complicated during the back half of 2025.These developments highlight the challenge of evaluating and quantifying legal risk when the governing rules are still taking shape. Even familiar issues can take on new complexity as states refine their interpretations or pursue different enforcement priorities, making long‑term planning more difficult. In this environment, staying attuned to emerging regulatory signals and reassessing risk‑management strategies on an ongoing basis remain essential as the industry continues to evolve.
