Hawaii is one of the most restrictive anti-gambling states in the US, with a state law that criminalizes most forms of gambling and only permits limited exceptions for social games. However, recent updates on law enforcement efforts this winter revealed just how big this illegal market is becoming. According to reports, police are aware of around 50 illegal game rooms operating on the island of Oahu alone. A state law enforcement estimate says that illegal gaming is a $700 to $800 million a year business, with some illegal rooms taking in as much as $10,000 per day.
This is why the 2026 session is becoming a two-pronged debate: creating a legal sports betting market with a tax revenue source and, at the same time, regulating “event contract” types.
Sports Betting Bills Lay Out a High-Cost, Mobile-Only Model
Companion bills SB 3303 and HB 2570 will legalize sports betting through a series of licensed online operators. The details that have emerged so far, as reported by industry publications, are as follows:
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A minimum of six operator licenses will be granted;
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A fee of $500,000 for an initial five-year license;
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A 15% tax rate on adjusted gross sports wagering receipts.
The draft framework is meant to drive the market towards a small number of heavily vetted operators from the very beginning.
A New Working Group Could Decide the Pace
Another legislative process in the works is the Tourism and Gaming Working Group. That’s a panel of 24 members that includes legislators, law enforcement officials, and representatives from the gaming and tourism industries. The panel has been charged with producing a report with recommendations by the end of 2026 or early 2027. This working group is supposed not only to be looking at sports betting but also considering whether a casino concept is included as part of the New Aloha Stadium Entertainment District.
This is important because the last time there was a serious attempt to pass sports betting legislation in Hawaii, it stalled in a conference committee. Now it appears that the legislative leadership is looking for a “bigger answer” before the legislation is finally passed.
Prediction Markets Become the Other Front
HB 2198 also would classify prediction markets that allow people to contract on the outcomes of events in the world (sports, politics, etc.) as a form of illegal gaming in Hawaii. There is an effective date provision for July 1 as the coverage for the bill.
The intent is to address the fact that people in Hawaii already have access to a product that is functionally equivalent to gaming, even if it is not currently legalized. They just call it a form of financial speculation.
Why This Mix of Bills Is Not a Contradiction
Hawaii can maintain its hard line against “gray area” event contracts while continuing to weigh whether a controlled sports betting model can help offset the existing black market with some oversight and tax dollars. The issue, though, is one of timing. The working group process may slow the process of passing sports betting legislation, but it also may limit the possibility of another last-minute failure. The latter could be achieved by requiring lawmakers to work out the fundamentals of who regulates sports betting, what it costs to comply with regulations, and what regulations are non-negotiable.
