Prediction market executives are increasingly laying bets on the risk that their fast-growing business faces an existential threat from the US Supreme Court, On The Money has learned.

That was a key takeaway from the “Predict” conference on Wednesday in Manhattan sponsored by organizer DealFlow, which (full disclosure) hired me as a moderator. The event featured panels on how prediction platforms can further expand an $188 billion industry that surged more than 70% this summer versus the previous three months.

They’re looking outside of sports, which currently dominates the niche. That could mean more wagering on high-profile M&A deals (Skydance’s recent purchase of WBD was one of the recent biggies), or picking winners of “Dancing With The Stars” or the upcoming midterm races in hotly contested Senate seats in Texas and Michigan.

Prediction markets are dominated by men, so there’s also lots of talk about how the market can better appeal to women. Yes, there’s plenty of room for growth, industry execs say. That’s the good news. The bad news is what’s looming that could screw it all up. 

The US government considers wagers placed in prediction markets akin to buying a futures contract; thus on the federal level you get oversight from the Commodity Futures Trading Commission and the Securities and Exchange Commission. That lighter-touch regulation by the feds is exactly what has led to the explosive growth.

But many states are taking the position that prediction markets are a form of gambling, pure and simple. That means the biggest players, Polymarket and Kalshi, need to be registered with on the state level and comply with local gambling laws or face civil litigation.

Places like New York have begun to file cases asserting that these venues are actually gambling dens. In fact, nearly two dozen states have active cases on the docket sowing confusion across the industry.

There is only one solution to set the record straight and that would be SCOTUS coming in and ruling on whether wagering in prediction markets is like buying a stock, bond or commodity contract or whether it’s just glorified gambling.

“It’s now a foregone conclusion that the Supreme Court will rule on this,” said one top industry executive at Wednesday’s conference. “I can’t tell you how it’s going to turn out, but it will be a defining moment for the industry.”

A few years back, the securities industry was eyeing a similar predicament and a prospective showdown with New York’s Eliot Spitzer, a self-styled “Sheriff of Wall Street,” only to see him become governor and resign in a prostitution scandal. After that, state AGs were content on allowing the feds to rule over Wall Street.

Gambling is a bit different. The states have been regulating it for some time as it has become a legal and mainstream activity outside the confines of Vegas or Atlantic City.

Here are the proverbial stakes: If SCOTUS rules for the feds, all those forecasts of a vast expansion in the prediction markets could well happen. On the other hand, the industry could face massive headwinds from an adverse ruling.

Specifically, if SCOTUS rules the platforms are bookies, they, like all book makers outside the organized crime variety, would be forced to seek state gambling authority approvals, comply with a patchwork of costly state laws and growth-stifling conditions.

Now the question is whether SCOTUS will rule on the matter anytime soon. A bunch of states have recently asked the nation’s highest court to weigh in on New Jersey’s bid to overturn an appellate court ruling that said the feds hold the jurisdictional upper hand.

The bottom line: A lot is up in the air for prediction markets, and industry executives are hedging their bets.