California’s gambling framework has been thrust back into the spotlight after state agents moved swiftly to shut down a newly launched Historical Horse Racing (HHR) product at Santa Anita Park, triggering a legal dispute that could have far-reaching implications for the classification of gambling products in the state.

Just 48 hours after the HHR machines went live, the California Department of Justice (DOJ) seized 26 units from the Arcadia-based racetrack, arguing that the terminals breach state gambling laws. The machines, which closely resemble slot machines but determine outcomes using data from previously run horse races, have long occupied a legal grey area in several US jurisdictions.

Santa Anita has since filed suit against the DOJ, claiming the seizure was unconstitutional. The racetrack maintains that HHR products are lawful under California law, pointing to legislative opinions and interpretations that date back nearly 20 years. According to the operator, the launch followed discussions with state authorities, with no formal stop order issued prior to enforcement action.

The dispute was a central focus of the latest episode of SBC’s iGaming Daily podcast, where host Charlie Horner was joined by SBC, Managing Editor, Jessica Welman. The pair unpacked the regulatory and legal context surrounding the raid, with Welman suggesting the confrontation may have been anticipated by Santa Anita.

Welman noted that this kind of enforcement action can sometimes be a deliberate catalyst for legal clarity. Horner said during the discussion. “If legislation stalls, a court ruling can become the fastest route to certainty.”

Welman expanded on this point, arguing that operators occasionally have little choice but to force the issue through the courts.
“Sometimes you do these things to get arrested, to get sued, to get to court because maybe you haven’t made progress on the legislative front,” she explained. “A judicial ruling can deliver the clarity that lawmakers haven’t.”

Prediction markets under growing state pressure

The podcast also examined the increasingly fragmented regulatory landscape facing US prediction markets. While the federal picture remains uncertain, with new CFTC Chair, Michael S. Selig, publicly calling for a “minimum dosage of regulation”, state-level authorities are adopting a far more aggressive posture.

Welman highlighted recent enforcement successes by state regulators, including Massachusetts securing an injunction against Kalshi and Nevada opting to sue Polymarket directly in state court, rather than relying solely on cease-and-desist notices.

Despite these headwinds, major gambling and gaming operators continue to explore the sector. FanDuel has rolled out its prediction markets product on a nationwide basis, but has so far focused on non-sports verticals such as entertainment and business events, including the Oscars.

According to Welman, this strategy allows established operators to test the commercial and regulatory waters without directly clashing with existing sports betting frameworks in regulated states.

“It’s very much a ‘test your truth’ approach,” she said. “Big players can maintain a presence in prediction markets while regulators and courts fight over what the future of the sector actually looks like.”

As both the HHR dispute in California and the wider prediction markets debate play out, the coming months are likely to prove pivotal for how US regulators, courts and lawmakers define the boundaries between gambling, wagering and financial-style market products.