The Impact of Tokenization and AI on Sports and Prediction Markets Betting: Insights from 2025

In 2025, the tokenization market experienced remarkable growth, reaching approximately $1.24 trillion, influenced significantly by regulatory clarity. This article explores the influence of tokenized edge cloud streaming and artificial intelligence (AI) on sports betting and prediction markets, revealing a rapidly changing environment shaped by technological advancements and regulatory developments.

Key Takeaways:

The global tokenization market grew to $1.24 trillion in 2025, marking a sharp increase from 2024.
The U.S. sports betting market saw extensive regulation, with challenges related to illegal gambling practices becoming prominent.
AI and tokenization are reshaping the sports industry into an interactive digital economy, allowing for real-time betting and personalized experiences.
Major platforms are integrating cryptocurrency into prediction markets, expanding their reach across traditionally restricted states.
Tax implications for digital asset wagering are evolving, creating new challenges for bettors.

Tokenization of the edge cloud streaming and AI are transforming sports and prediction markets betting, a rapidly developing immersive experience.

The Transformation of Sports Betting Through Tokenization and AI

In 2025, the rapid growth of sports betting in the U.S. produced a tangled web of state-specific regulations. Currently, 31 states and the District of Columbia provide mobile betting, while residents in 11 states where betting remains illegal must navigate local laws carefully.

This boom has also revealed significant issues, as FBI Director Kash Patel highlighted the alarming sports betting and rigging operations that were uncovered through extensive investigations in 2025. These incidents have led many to view 2025 as a “turning point” in the U.S. sports betting landscape, following a series of major scandals that revealed deep-seated vulnerabilities in professional and collegiate sports. The sheer number of cases has prompted comparisons between illegal sports betting and insider trading, with sportsbooks seen as victims of a widespread fraud scheme.

To combat this rampant illegal gambling, which is estimated to generate $673.6 billion annually, the FBI collaborates with state and international partners and employs robust enforcement strategies. According to a warning from the Internet Crime Complaint Center (IC3), the integrity of sports betting is critical for public safety and economic health.

A recent NBC News Decision Desk Poll showed that 70% of Americans believe the rise of streaming-based sports betting undermines game integrity, with various kinds of match manipulations occurring due to players colluding with gamblers for financial benefit.

AI and Edge Cloud Streaming Technology in Sports Betting

Despite challenges like match-fixing, the synergy between legal mobile wagering, advanced edge cloud technology, and AI has completely transformed the sports sector. The shift from passive viewership to active participation is now the norm, thanks to the provision of tailored experiences and instant data analysis.

Sports leagues, including the NBA, MLB, and NFL, have spearheaded this transition to online platforms to attract younger audiences and counter dwindling television ratings. Major streaming services such as Amazon, ESPN+, and Apple TV+ now host significant games, fostering fan engagement. These direct-to-consumer models allow leagues to manage their content more effectively while also facilitating global data collection using AI and edge cloud streaming.

These innovations have revolutionized sports betting by enabling real-time wagering through low-latency feeds and mobile applications, creating immersive betting experiences. This allows for micro-bets during specific game moments, transforming viewers into active participants, enhancing engagement, and unlocking brand new revenue streams for both leagues and operators.

Expansion of Crypto-Integrated Prediction Markets

The landscape for U.S. prediction markets in 2025 expanded rapidly through federal oversight from the Commodity Futures Trading Commission (CFTC), allowing operations across all 50 states, including areas where traditional sports betting remains banned. This strategy enabled platforms like Kalshi, DraftKings, and FanDuel to penetrate new markets, reporting substantial trading volumes by merging sports betting with financial betting, bolstered by AI and blockchain technology.

A pivotal moment came with Kalshi, the first federally regulated prediction market exchange, allowing users to buy and sell contracts on various events such as sports and politics. This integration includes partnerships with Coinbase and Robinhood, enabling users across all states to place wagers on games, even where traditional sports betting is illegal. Additionally, Kalshi's recent collaboration with Binance-backed BNB Smart Chain (BSC) facilitates seamless crypto transactions for trading.

In October 2025, Trump Media & Technology Group (TMTG) announced plans for its own prediction market called "Truth Predict," in partnership with Crypto.com, covering a wide range of events including sports.

The Chicago Board of Exchange (CBOE) Global Markets also revealed plans to create prediction markets focused on economic events, avoiding sports due to regulatory concerns. Meanwhile, Polymarket, a leading blockchain-based prediction market, established partnerships to support a regulated predictions market.

However, with this swift evolution comes audience fragmentation and complicated legal challenges that have sparked debates among state gaming regulators.

Tax Implications for the Tokenized Streaming Wagering Economy

The rise of sports betting and prediction markets utilizing tokenized streaming technologies has led to a complex international tax landscape, particularly influenced by the introduction of new Digital Services Taxes (DSTs) and pending international tax negotiations.

The "One Big Beautiful Bill Act" introduced significant changes to how gambling revenues are taxed, which raised concerns about unintended penalties for legal bettors. Beginning in January 2026, bettors will only be allowed to deduct 90% of losses against winnings, introducing the concept of "phantom income." For instance, a bettor who breaks even will still incur a tax on a “phantom profit.”

Additionally, the IRS classifies cryptocurrency transactions as property, with specific tax obligations. Using digital assets for bets represents a disposal of those assets with potential capital gains or losses. Consequently, bettors need to keep meticulous records of all transactions, including dates and fair market values, and must report all income from digital asset transactions as required by IRS regulations.

This evolving tax environment poses challenges for individuals participating in the tokenized streaming wagering economy, necessitating a thoughtful approach to compliance in a rapidly changing landscape.