Prediction market websites are now facing almost 50 active enforcements from various state regulators, according to CFTC Chairman Mike Selig, who cited the figure during a recent op-ed discussing Kalshi, Polymarket, Coinbase and Crypto.com.
The growing number of cases indicates a broader legal fight over whether sports-related event contracts should be treated as federally regulated financial products or as online gambling regulated by individual states.
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What's Driving the Enforcement
There's one key question at the heart of the dispute: does the Commodity Exchange Act give the CFTC exclusive right over event contracts, or can states enforce their own gambling laws against sites offering sports-related markets?
States argue that they should be able to and several have already taken action:
- New York:
Attorney General Letitia James sued Kalshi and is seeking around $36 billion, after a federal judge declined to block state regulators
- Washington:
The state won a preliminary injunction against Kalshi in July, with the court rejecting Kalshi's defense that federal law prevents state regulation.
- Illinois:
The state sent a cease-and-desist letter to Polymarket in January, following earlier letters to Kalshi, Robinhood and Crypto.com.
- Michigan:
Polymarket sued the state, claiming it faced an “imminent risk” of enforcement after the attorney general took action against Kalshi.
- New Jersey:
The state issued a cease and desist letter to Kalshi, but the federal court took the platform's side and blocked the state from enforcing it.
Who's Winning the Legal Fight
The results have varied by state rather than settling the issue nationwide. The CFTC has taken the unusual step of suing Arizona, Connecticut, Illinois and others to stop enforcement actions and also issued an order to Kalshi to continue operating in New York, against the state's wishes.
Courts are also of mixed opinions: Kalshi won preliminary relief in New Jersey and successfully argued that federal law trumps state regulation before the Third Circuit. It lost that argument in Washington, however, and is still appealing an unfavorable ruling in Maryland to the Fourth Circuit. Nevada's case remains unresolved, while the Ninth Circuit considers an appeal.
Congress has joined the debate as well, with senators John Curtis and Adam Schiff introducing the Prediction Market Are Gambling Act in March, a bill that prevents CFTC-regulated platforms from providing sports or casino-related event contracts.
What This Means for The Prediction Market Industry
The issue is affecting the entire prediction market industry and not just the companies involved. Selig noted that prediction market users have quadrupled to around 15 million over the past two years alone, and industry groups have taken up opposing positions.
The Coalition for Prediction Markets supports federal oversight while a newer group led by former Rep. Mick Mulvaney is calling for states to crack down on prediction markets, arguing that event contracts are essentially another form of sports betting.
Until the courts or Congress settle the question of whether federal law overrides state gambling rules, access to prediction markets in the US is likely to continue changing from state to state.
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