Leading prediction markets Kalshi and Polymarket have enabled their users to bet on just about everything over the past year — from the outcomes of political races and daily temperatures in U.S. cities to the winners of sporting events.
When it comes to the 2026 Kentucky Derby, though, it appears they are bowing out.
As of Thursday morning, neither Kalshi nor Polymarket had listed a market for the winner of Saturday’s Derby in Louisville, which is both the most prestigious annual event in its sport and a marquee date on the sports betting calendar. A Kalshi spokesperson declined comment when asked if the company planned to accept trades on the Kentucky Derby. Polymarket briefly opened a market last week then took it down — apparently at Churchill Downs’ request.
“We reached out to Polymarket and asked for the wagers to be removed,” Churchill Downs spokesperson Breck Thomas-Ross told ESPN. “And Polymarket complied.”
Polymarket did not respond to multiple requests for comment sent via e-mail.
The prediction markets’ caution around horse racing might seem out of place, especially given the brash ways in which they have challenged sports gambling companies, engaged in legal fights with states and continued to offer trades that have raised objections from leagues such as the NFL. But industry experts said there are good reasons why Kalshi and Polymarket might stay away from the sport, including the Interstate Horseracing Act. The 1978 law created a federal regulatory framework for betting on horse races, giving state racing commissions and racetracks significant power over wagering on their events.
“Right now, the law’s fairly clear on what [prediction markets] are allowed to do without consent by our sport,” Tom Rooney, the president and chief executive officer of the National Thoroughbred Racing Association, said in an interview with ESPN.
“There is a door that could be opened if a race track or state gaming commission or horseman’s group or something like that would give consent. We don’t have that yet.”
Rooney, a former U.S. congressman, tried to head off a potential fight with prediction markets by sending a letter earlier this month to the Commodity Futures Trading Commission, the federal agency which oversees them. He warned that any trades on horse racing would be illegal and could “cause substantial economic harm to the horseracing industry.”
The CFTC has not said publicly whether it would approve markets on horse racing or whether it believes such trades would violate the Interstate Horseracing Act. A spokesperson for the CFTC declined to comment on the record to ESPN, and Rooney said the organization had not yet responded to his letter.
For the industry writ large, prediction markets represent a massive threat — an incursion that could upend the long-standing financial mechanics of the sport itself.
Decades before a 2018 U.S. Supreme Court decision paved the way for the current sports betting boom, the only legal way to bet on sports in most states outside of Nevada was to visit a window at a racetrack. Simulcasting later allowed bettors at one racetrack to watch — and wager on — a race somewhere else, with both locations sharing part of the revenue. And over time, gambling became intertwined with the sport itself, according to John Holden, a professor at the University of Indiana who specializes in sports gambling and regulatory issues.
“The wagering at the Kentucky Derby is the event,” he said. “That’s not what a Yankees-Red Sox game is to people. People might bet on it, but people will go to that game without betting on it. When people go to the Kentucky Derby, by and large they’re there to bet on the horse race.”
Last year, for example, bettors wagered a record $234 million on the Kentucky Derby across all platforms, according to Churchill Downs, as well as an additional $239 million on other races earlier in the week.
These wagers also help sustain horse racing financially by generating tax revenue that is reinvested into the sport. In Kentucky, for instance, 1.5 cents of every dollar wagered on horse racing is taxed and redirected to prize money for future races or to help fund racetrack operations and breeding programs. That translates to roughly $2.25 million that has been reinvested in Kentucky’s horse racing ecosystem since July 2024.
Thomas Lambert, an applied economist with the College of Business at the University of Louisville, said prediction markets could disrupt this cycle. Any money directed to those entities, rather than official gambling platforms, would not go into the same state tax pool. A smaller tax pool, in turn, could lead to smaller purses, which could lead to smaller fields for races and make future events less enticing for bettors — fueling a spiral.
“If too many people use these prediction markets, then the tracks are basically sunk,” said Lambert, who also teaches courses in Louisville’s equine industry program, which receives funding from state tax revenues on horse racing wagers.
Lambert noted that Kentucky also benefits significantly from tax revenues generated by historical horse racing machines at race tracks, which allow bettors to wager on anonymized and archived horse races in what amounts to playing a slot machine.
But as the horse racing industry confronts troubling declines across the country, even a moderate shift toward prediction markets — and away from state-regulated gambling — could have an impact. According to statistics compiled by The Jockey Club, the number of horse races held in the U.S. was down by nearly 5% last year, while the total betting handle on U.S. horse racing decreased by 2%.
This is in part why entities such as Churchill Downs, which operates the Kentucky Derby, are so protective of their turf. The company has its own online betting platform, TwinSpires, in addition to partnerships with sportsbooks such as DraftKings and FanDuel, from which it receives a cut of the revenue. Churchill Downs also recently agreed to pay $85 million for the intellectual property, trademark and branding rights for the Preakness Stakes, which is the second leg of the Triple Crown. (The Kentucky Derby is the first, and the Belmont Stakes is the third.)
Kentucky state legislators recently passed a bill that will prohibit racetracks in the state from cutting deals with prediction markets, but some in the horse racing industry see such agreements as a possible avenue to growth. Rooney said such deals could still materialize. In the meantime, though, he remains “definitely concerned” about how Kalshi, Polymarket and others could impact his sport.
“It’s sort of the new kid on the block that’s trying to have it without playing by the rules that we’ve been playing by,” Rooney said. “So, I am concerned on that front. … But I am comforted by the fact that we do have [the Interstate Horseracing Act]. And I would put the law up in court any day to stand as a matter of fact that the prediction markets are going to have to navigate.”
Holden said he could envision prediction markets eventually challenging the Interstate Horseracing Act by continuing to argue that their markets do not constitute wagering. It would be a new angle to their ongoing fights with states, he said, and likely wind up in the same place.
“I think this is really another stop on the road to the Supreme Court,” Holden said.
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