A federal judge in Iowa denied the bid from prediction market Kalshi to block state gambling enforcement from regulating its operations under the state’s gambling laws.
U.S. District Judge Stephen Locher ruled on Tuesday, September 8, that Kalshi was unlikely to win its argument that the Commodity Exchange Act preempts Iowa gambling law. He found the Act's exclusive federal jurisdiction covers commodity futures, not sports betting, and said Congress would have needed to clearly state any preemption of state gambling law.
Kalshi filed the suit in March 2026 after a meeting with staff from Iowa Attorney General Brenna Bird's office, which led the company to conclude that Iowa would regulate it under state gambling law.
But since the judge ruled against the suit, the company and many of its traders wonder what awaits them in the period ahead. The ruling does not end the case. Kalshi's lawsuit continues, but Iowa is no longer blocked from applying state gambling law while it does.
A Must-Try Prediction Market Site
Current Legal Status of Prediction Markets in Iowa
Iowa intends to regulate prediction markets under gambling law; officials consider trading and exchange platforms the same as betting and gambling.
Because the Commodity Futures Trading Commission (CFTC) already regulates prediction markets, it argues that no other state needs to license or certify them to operate.
The CFTC is the federal regulator for U.S. derivatives markets, including event contracts. The dispute is whether that federal oversight displaces state gambling law.
The Iowa Senate passed
by 45-1 on March 31, 2026. The bill would require prediction markets to hold a permit from the Iowa Department of Revenue, with a $100,000 annual renewal. The bill as introduced set the initial permit fee at $10 million, and reports on the Senate-passed version put it at $20 million. That version also adds a 20% tax on adjusted revenue from Iowa traders and a separate 20% excise tax on event contract prices.
Iowa aimed to tighten operator licensing rules and increase revenue taxes. By “operator,” it referred to prediction markets. Still, the proposal met House resistance because of potential federal conflicts (CFTC rules overriding state regulations).
In May 2026, Bird was one of 41 state attorneys general who filed a comment with the CFTC describing prediction market apps such as Kalshi and Polymarket as unregulated sportsbooks.
For now, prediction markets, including Kalshi, are accessible to Iowans while the court case is still pending.
What Happens Next?
Kalshi has appealed. It filed a notice of appeal on September 15, and the U.S. Court of Appeals for the Eighth Circuit has docketed the case, with Kalshi's opening brief due November 6. Unless a court grants a stay, Iowa can apply state gambling law, enforced by the Iowa Racing and Gaming Commission, while the appeal runs.
If it does, Kalshi may decide to withdraw its services from this market. Other scenarios include Kalshi staying, but offering limited services. For instance, it may completely remove sports trading from its platform, change its fee structure, or change other platform rules. Finally, though highly unlikely, nothing may change even if Kalshi becomes regulated under state gambling laws.
If the CFTC continues to regulate Kalshi, the platform may continue operating as it has until now, or it may seek to mitigate potential future repercussions by altering its services, as it would if state gambling laws took effect.
Right now, no one can know for sure what will happen. For a comparison of platforms and where each operates, see our
list of prediction markets.
A Must-Try Prediction Market Site
Advertiser disclosure
Available with Dimers Pro
