Key takeaways

• Arbitrage betting is legal in states that allow sports betting. It's placing ordinary bets at more than one licensed book.

• Sportsbooks can still refuse bets, limit stakes or close accounts under their own terms, and that's the main consequence arbers face.

• Massachusetts requires sportsbooks to tell bettors within 48 hours when their accounts are limited.

• Prediction markets such as Novig, Kalshi and Polymarket US operate under federal CFTC oversight, and some states are contesting that in court.

The short answer

Arbitrage betting is legal in the US wherever sports betting is legal. An arb is two or more ordinary bets at licensed sportsbooks or prediction markets, sized so every outcome pays the same. Each bet on its own is a normal wager, and placing them at different books doesn't make them unlawful.

What arbers run into is the sportsbook's terms of service, which is a contract question.

What sportsbook terms allow

Licensed sportsbooks reserve wide discretion over who they take bets from. FanDuel's Iowa house rules say the book "reserves the right in its sole discretion, to refuse, limit or cancel any wager or series of wagers." DraftKings' New Jersey terms let it "suspend or close your Account at any time in DraftKings' sole and absolute discretion, for any reason or no reason."

Massachusetts, the state that has regulated the practice, leaves those clauses in place. It reviewed operator data, found that winning bettors had their limits cut, and responded with a notice rule rather than a ban: since operators had to comply by June 1, 2026, a limited bettor gets told within 48 hours which markets are limited. The account limits guide has the details.

Breaking the terms is a different matter. A duplicate account or one in someone else's name violates sportsbook terms, and a book can close it and void its bets.

Where prediction markets fit

Novig, Kalshi, Polymarket US and ProphetX are designated contract markets regulated by the Commodity Futures Trading Commission, the federal regulator, rather than state gaming commissions. They offer sports contracts in states without legal sportsbooks, and several states are challenging that in court. Availability can change while those cases run, so check each platform's current state list before funding an account.

Using a prediction market as one leg of an arb is legal wherever the platform is available to you, and federal rules require these markets to offer impartial access.

Taxes

Arbitrage profits can be taxable. How they're treated depends on your situation and where you live, and a tax professional can tell you what applies.

Legality questions

Can a sportsbook refuse to pay out an arb?

A book pays winning bets under its house rules, and those same rules let it cancel bets in some cases, as FanDuel's right to "cancel any wager" shows. It can also close the account afterward.

Is arbitrage betting legal outside the US?

That depends on the country, and this site covers the US only.

Run the numbers

Size any arb in the arbitrage calculator before you place either leg.