Placing a Bet: The Future of Prediction Market Regulation

Abstract

Prediction markets have rapidly evolved into widely accessible platforms that allow users to trade contracts on the outcomes of real-world events. Though they are a type of financial derivative, they can resemble gambling from a user perspective, raising fundamental questions about how they should be classified and regulated. As prediction market operators like Kalshi and Polymarket expand their offerings, particularly in sports-based contracts, regulators and legislators face an escalating conflict over whether such markets fall within the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) or should be subject to state gambling laws. This note conducts an in-depth analysis of the ongoing litigation, enforcement actions, and legislative efforts shaping this fragmented regulatory landscape, examining conflicting federal court rulings, a growing number of state interventions, and congressional legislative proposals that together underscore a broader federalism dispute between state and federal authority. It also explores key concerns driving regulatory scrutiny, including the functional similarities between sport-based event contracts and sports betting, as well as risks of insider trading and market manipulation. While courts may be likely to uphold the CFTC’s jurisdiction under a theory of field preemption, a regulatory framework permitting concurrent state oversight, especially for sports-related contracts, could more effectively address consumer protection concerns.

I. Introduction

In March 2026, Americans were projected to legally wager $3.3 billion on the National Collegiate Athletic Association’s (“NCAA”) March Madness tournament, a 54% increase from only three years prior.¹ As millions filled out brackets and placed bets through traditional sportsbooks such as DraftKings and FanDuel, another form of wagering surged alongside it. Rather than placing bets against a “house,” users on prediction market platforms like Kalshi traded contracts with one another on specific outcomes, ranging from whether a player would score 40 or more points to who would win the tournament’s Most Outstanding Player award. Yet, while these markets may resemble sports-betting, they operate outside of state gambling law, instead positioning themselves as a rapidly expanding type of financial investment. Sports betting was legalized in 2018, and now a majority of states have adopted it in some form. But as prediction markets have grown, Americans are betting more than ever, and not just on sports.

Prediction markets, online exchanges that allow users to trade contracts tied to the outcome of future events, have rapidly expanded from niche political betting experiments to offer contracts encompassing politics, economics, the environment, sports, and culture to Americans in every state. Shifts in the regulatory landscape have particularly fueled this growth, allowing operators like Kalshi to offer previously restricted contracts. As a type of financial derivative, event contracts are federally regulated by the Commodity Futures Trading Commission (“CFTC” or “the Commission”) under the Commodity Exchange Act (CEA) of 1936. Under the CEA, the Commission also retains the authority to prohibit event contracts involving enumerated categories, including “gaming,” if it determines such contracts are contrary to the public’s best interest. However, “gaming” is not extensively defined, leaving regulators and courts to determine whether event contracts, particularly those based on sports, fall within its scope. On the other hand, States and tribal authorities, which have historically maintained sole jurisdiction over gambling, argue that these contracts are functionally equivalent to gambling, and therefore subject to state law. Prediction markets have also raised alarms over insider trading, including bets tied to government decisions or actions by elected officials.

Such tension has produced a fragmented and rapidly evolving legal landscape. Federal courts have reached conflicting conclusions regarding the legality of prediction market offerings, while states have pursued divergent enforcement strategies including cease-and-desist orders and legislative proposals. Yet the CFTC is determined to retain sole jurisdiction over prediction markets. The feud between States and the federal government will determine the future of the prediction market industry, and it is likely that the Supreme Court will eventually weigh in.

This note argues that the current regulatory conflict over prediction markets reflects a deeper federalist tension between federal derivatives regulation and states’ traditional authority over gambling. It suggests that, while courts may be inclined to uphold the CFTC’s jurisdiction under a theory of field preemption, a framework that allows for limited concurrent state regulation, particularly for sports-based event contracts, may better address concerns related to consumer protection. Part II examines the rise of prediction markets, tracing their evolution from niche informational tools to widely consumed financial investments, as well as outlines their underlying economic logic. Part III analyzes the competing interests of key actors and the fragmented regulatory landscape at both the state and federal levels, highlighting major legal battles, legislative efforts, and the CFTC’s assertion to retain sole authority. Part IV considers the future of prediction market regulation, briefly exploring how the Supreme Court may approach the tension between federal and state authority, and suggesting that a more balanced framework, particularly in the context of sports-based contracts, may help address consumer protection concerns. This note concludes by arguing that attention should be refocused on protecting consumer interests.

II. The Rise of Prediction Markets

Prediction markets offer “event contracts,” a subtype of derivative contracts, for which the payoff is based on the outcomes of future, real-world events.² Also called “information market” or “event futures,”³ these contracts are binary options that allow purchasers to choose between two outcomes—”yes” and “no”—and settle at a fixed value.⁴ At any given time, the price of a contract reflects the market’s estimated probability of a “yes” result; for example, a “$1 payout contract trading at $0.60 suggests a 60% probability of that event occurring.”⁵ Prediction market platforms are federally regulated as designated contract markets (“DCMs”) by the Commodity Futures Trading Commission (“Commission” or “CFTC”) under the Commodity Exchange Act.

Prediction markets exploded onto the American marketplace in the fall of 2024. KalshiEX LLC (“Kalshi”), a U.S. based DCM, launched “Congressional Control Contracts” on its platform.⁶ These contracts were based on the outcome of political events, including the 2024 Presidential Election. Concerned that such contracts were comparable to gaming and contrary to the public interest, the CFTC under the Biden Administration prohibited these contracts, arguing that they are equivalent to gaming or election gambling, which many states outlaw.⁷ However, following a suit from Kalshi, the district court found that the Commission errored in categorizing these contracts as involving either gaming or gambling, vacating the CFTC’s order.⁸ The D.C. Circuit denied the Commission’s appeal for a stay, and the CFTC ultimately voluntarily dismissed its appeal in May 2025 under the Trump Administration.⁹

Following Kalshi’s legal victory, prediction markets have since grown to offer contracts based on economics, culture, science, technology, climate, sports, and companies.¹⁰ When logging onto Kalshi’s digital app, for example, users are invited to “trade on anything,” and this is far from an exaggeration. Contract offerings pose questions about the Department of Homeland Security’s funding, the price of Ethereum in March, artists who will be featured on Kanye West’s next album, and more.

The volume of capital traded on these platforms has increased dramatically, as has the value of prediction market operators themselves. Nearly $12 billion was traded on Kalshi and Polymarket, another major prediction market platform, in December 2025, according to investment bank Piper Sandler.¹¹ Moreover, these companies raised billions from investors; Polymarket, for example, was valued at $9 billion in October 2025.¹² More recently, as the market continues to expand rapidly, combined weekly prediction market volume across both platforms exceeds $5.9 billion.¹³

Such extraordinary growth reflects a growing demand for “real-time, crowd-sourced intelligence,” positioning prediction markets as insightful indicators of market sentiment beyond mere speculation.¹⁴ Tarek Mansour, Kalshi’s co-founder, argues that prediction markets are “the most effective way to aggregate information and the crowd wisdom” as “people don’t lie when money’s involved.”¹⁵ Mansour’s observation aligns closely with the principles of the efficient market hypothesis: “in a truly efficient prediction market, the market price will be the best predictor of the event…[this] does not require that all individuals in a market be rational, as long as the marginal trade in the market is motivated by rational traders.”¹⁶ Yet, research shows this is nuanced. One study of over 2,500 political prediction markets during the 2024 presidential election found that, while they often predict outcomes more accurately than chance, prices were not perfectly efficient: identical contracts had divergent prices across exchanges, and daily prices weakly or negatively correlated.¹⁷ Even so, these markets can still be quite informative, providing reasonably accurate forecasts where prices reflect the collective judgement of many participants with money at stake. As a result, prediction markets are reshaping how investors evaluate risk and forecast events, employing platforms like Kalshi and Polymarket alongside traditional economic indicators as sentiment signals.¹⁸

Despite their growing influence and utility, many have raised regulatory, ethical, and practical concerns, particularly noting the striking similarities between prediction markets and gambling and gaming. Regulated currently as event contracts, prediction market operators are subject to far fewer rules than if they were subject to state gambling laws, or treated as a type of security.¹⁹ However, under the Commodity Exchange Act, the CFTC has the ability to prohibit specific types of event contracts if they fall within certain enumerated categories, including unlawful activity, terrorism, assassination, war, and gaming.²⁰ Though proponents argue that prediction markets are “fundamentally different” from gambling and gaming, particularly noting their underlying economic logic, the CFTC could prohibit these contracts if they determine they constitute “gaming” and are “contrary to the public interest”²¹ Though a D.C. federal court found that political event contracts did not constitute gaming, state courts have since been divided, with courts in Maryland and Massachusetts, for example, deciding that prediction marker wagers are effectively games.²² These ongoing regulatory questions highlight two critical areas of concern for prediction markets, sports betting and insider trading, which will likely shape how state and federal authorities navigate this evolving landscape.

IIa. Sports Dominated, but Not Sports-Betting

In 2018, the Supreme Court ruled in Murphy v. National Collegiate Athletic Association (“NCAA”) that the widely enforced, decades long ban on sports betting was unconstitutional.²³ Since then, 40 states have legalized sports betting, and the industry generated a total gross revenue of $125 billion in 2025.²⁴ Many states argue that sports-based event contracts are virtually equivalent to sports betting and consequentially should fall under state gambling law.²⁵ Most activity on prediction market platforms is sports-related; for example, approximately 90% of activity on Kalshi falls into this category.²⁶ Moreover, in 2025, 89% of Kalshi’s fee revenue was sports-related, and the company reported $1.9 billion in college basketball wagers in February 2026. There are certainly many differences between prediction market operators’ event contracts and traditional sportsbooks’ betting services. Sportsbooks serve as the “house,” for example, taking the opposite side of the users’ bet.²⁷ Prediction markets, on the other hand, are peer-to-peer, connecting buyers and sellers on each side and profiting by charging trading fees.²⁸ Moreover, sportsbooks determine the odds, which may rise or fall after users place their bets. Whereas, the prices of event contracts are determined by the market’s perceived likelihood of an outcome, and shares can be bought or sold at any point until the contract closes.²⁹

But for users, is purchasing an event contract and wagering a bet against a sportsbook really that different? Sports-related event contracts closely resemble traditional sports wagering in form and user experience.³⁰ Many prediction market platforms allow users to make prop bets, wagering on the occurrence of player performance or specific events within a game that are not tied to the final score or overall outcome. Users can also combine multiple predictions into one larger contract, much like a parlay. Most concerningly, however, is that although sports account for more than 90% of the activity on many prediction market platforms, these platforms are not held to the same stricter regulations that apply to traditional sportsbooks and ultimately protect users. Many view sports-based contracts as a way to evade state-level gambling regulations, effectively legalizing sports betting in all 50 states and opening markets up to betters at 18, rather than 21.³¹ Additionally, prediction market platforms are not subject to the same responsible gaming advertising regulations designed to protect users. As advertising for these platforms has rapidly expanded, the American Gaming Association has reported that nearly half of digital sports betting ads seen by U.S. consumers failed to comply with state-level responsible gaming standards, likely because prediction market operators are not required to follow them.³² Their visibility is also significantly higher: Kalshi is the most visible sports betting brand by digital ad impressions, with nearly twice the exposure of FanDuel, the next most frequent advertiser.³³ As sports-based event contracts continue to mirror traditional betting while operating outside the same regulatory framework, policymakers face increasing pressure to determine whether event contracts and traditional wagering are fundamentally different or functionally indistinguishable in practice.

IIb. Insider Trading and Market Manipulation

Another regulatory challenge facing prediction markets is insider trading and market manipulation concerns. For sports-related contracts, the ability to purchase contracts based on specific actions an athlete might take, effectively a prop-bet, creates an environment in which athletes could trade and profit from manipulating outcomes. Like licensed sportsbooks, these platforms prohibit athletes from trading on their own sports, but enforcement is challenging, and there are ways to circumvent the rules.³⁴ Some athletes, for example, have a friend or relative make the trade for them.³⁵

These concerns are not just limited to sports-based contracts. Hours before the U.S. military’s capture of Venezuelan president Nicholas Maduro, a Polymarket user suspected to be a government official anonymously bet tens of thousands of dollars on Maduro’s ousting, securing a $410,000 payout.³⁶ Similarly, U.S. House Representative Greg Casar (D., Texas) has pointed to suspicious trading related to the U.S.-Israel war in Iran, stating at a press conference that “on the day before the Iran war, 150 accounts placed highly-unusual bets on Polymarket that the war would start the next day.”³⁷ One analytics firm has even reported that a series of connected Polymarket accounts has earned $1 million predicting U.S. and Israeli strikes in the Middle East over the past two years, with most of the bets placed just a few hours before the event.³⁸ These concerning bets have occurred largely on Polymarket, placed by newly created accounts or those focused on one specific type of outcome, further suggesting insider involvement.³⁹

Though the CFTC has the ability to prohibit registered prediction markets from offering contracts based on terrorism, war, or assassination that are contrary to the public interest, concerning bets were primarily placed on Polymarket’s international version, which falls outside of the CFTC’s regulatory jurisdiction.⁴⁰ Polymarket may list U.S.-banned contracts, such as those related to war, on its international platform, which is only subject to U.S. law if Americans may trade these contracts.⁴¹ Although part of Polymarket is registered in the U.S., subjecting it to know-your-customer requirements, another part is registered in Panama, enabling greater untraceability for insider bets.⁴² Polymarket customers may also trade anonymously with cryptocurrency, obscuring the identities of traders.⁴³ To access the international version, Americans could use a virtual private network (“VPN”) to conceal their location.⁴⁴

Although CFTC-licensed exchanges are obligated to monitor for manipulation and insider trading, no American has been federally charged for prediction-market based insider trading.⁴⁵ Though the CFTC recently issued guidance to remind operators to take measures to prevent insider trading, and operators have responded to take additional measures, these efforts exist within a highly complex and rapidly evolving regulatory landscape at both the federal and state levels.

III. Interests at “Odds:” Legal Battles and Regulatory Challenges

Many competing interests are at stake in the regulation of prediction markets, drawing a wide range of actors including prediction market operators, traditional industry incumbents and tribes, state and federal legislators, and federal regulators. As a result, state efforts have prompted federal responses, and with many interests at odds, the issue ultimately reflects an ongoing duel between state and federal authority.

Traditional gambling organizations, tribal governments, and established sportsbooks are key incumbents working to protect their market positions. Tribal nations, backed by the 1988 Indian Gaming Regulatory Act (IGRA), “fund their governments through gaming, a $44 billion empire of casinos, horse racing and sports betting,” a delicate system that relies on carefully negotiated compacts with states.⁴⁶ After the Supreme Court legalized sports betting in Murphy v. NCAA, many sportsbooks hurried into the market by securing state-by-state licensing, sometimes working with local tribes.⁴⁷ Tribal market share has been hit hard by the rise of prediction markets. One New Mexico tribe’s sports betting revenue is down 29% so far in 2026, attributing the decline to sports-based event contracts, and warning that “prediction markets attempting to offer sports event contracts outside the established gaming regulatory framework threaten tribal sovereignty, consumer protections, and the economic foundation that support tribal governments.”⁴⁸ Tribes have responded by filing lawsuits against operators, though they have not achieved any major victories.⁴⁹ Tribes are now raising funds nationwide to challenge the CFTC directly in court.⁵⁰ Sportsbooks have taken a different approach, yet they too have felt the impact. For Flutter (FLUT), parent company of FanDuel, and DraftKings (DKNG), stock prices are down 50% and 32% respectively so far this year as investors worry prediction markets are eating into sports betting revenue.⁵¹ In response, many sportsbooks have launched their own prediction market platforms to stay competitive, but a ban on sports-based contracts would be the most favorable outcome for them.⁵²

IIIa. States Step In: Legislative and Enforcement Measures

States arguably have the most at stake, so it is no surprise that they have pursued widespread regulatory and legislative action, and in some cases, sought to ban prediction markets entirely. To many states, prediction markets disguise gambling as investing, illegally authorizing nationwide sports betting while evading state law.⁵³ Licensed gaming operators partner with over 8,400 state and tribal regulators to “ensure transparency, partner with sports leagues to protect integrity, and maintain strict consumer safeguards and responsible gaming practices.”⁵⁴ Prediction markets operate outside of such expansive oversight: Pennsylvania by itself has almost as many gaming regulators as the entire CFTC, which is tasked with overseeing nationwide prediction market operations.⁵⁵ The American Gaming Association (AGA) also estimates that states have lost over $700 million in state gaming tax dollars since prediction markets began offering sport-based contracts, which funds hospitals, libraries, schools, first responders, and other essential operations.⁵⁶ States argue that when prediction markets operate outside of the state regulatory framework, both consumers and communities face significant risks.

While approaches vary, states have generally taken two main actions: introducing legislation to regulate or prohibit prediction markets, and pursuing enforcement through legal battles with operators.⁵⁷ State-level legislators across the U.S. have introduced over 30 bills related to prediction markets; though some states, such as Arkansas and Louisiana, have simply declared prediction markets illegal with no formal action. A few of the bills prevent government officials from using material nonpublic information, such as New York Assembly Bill 9635, which prevents state officials from trading on information acquired in the course of their official duties. Other bills ban certain types of event contracts, such as Minnesota Senate Bill 4511, which prohibits prediction market operators from offering contracts based on sports, contests or casino-style games, people, politics, catastrophe, and death. Some states have introduced bills instituting heavy licensing fees and high tax rates. In Illinois, the Prediction Markets Regulation and Taxation Act (IL H 4168) would require prediction market operators to obtain a $1 million state license with a $1 million annual renewal fee, as well as pay a privilege tax equal to 50% of adjusted gross receipts from qualifying contracts involving Illinois residents. Montana is one of the only states to have successfully codified a complete prohibition on prediction markets, enacting a bill (MT SB 555) which makes all forms of online gambling, including event contracts, illegal.

States have also pursued legal action against prediction market operators, with ten states so far issuing cease-and-desist orders. Most of these suits have involved Kalshi, with some filed preemptively by the company and others brought by state authorities. Kalshi has pursued one of the most aggressive legal approaches, suing in multiple states and seeking declaratory and injunctive relief to block enforcement.⁵⁸ Arizona is the first and only state to bring criminal charges against a registered prediction market operator. While most suits are still pending, Kalshi has successfully blocked enforcement of state orders in several jurisdictions; for example, courts in Connecticut, New York, and Tennessee granted preliminary injunctions preventing state officials from taking action against the company. Other federal courts have ruled differently. In Nevada, a key battleground, a federal judge allowed the state to prohibit Kalshi from offering sports-, election-, and entertainment-based event contracts. Moreover, 39 States joined a coalition filing an amicus brief supporting Nevada’s position that states retain the authority to regulate prediction markets as gambling. In California and Wisconsin, tribal governments have filed lawsuits challenging Kalshi’s operations. These conflicting federal court rulings, with some granting temporary relief to platforms like Kalshi and others siding with state regulators, suggest that appeals courts will likely be split, making Supreme Court review probable.⁵⁹ The chart below provides a detailed description of state legislative and regulatory activity within each state.

Click the dropdown below to see a chart outlining state legislative and regulatory activity as of April 2, 2026.

State Legislative and Regulatory Activity (As of 4/2/2026)

State	Current Status	Description
Arizona	Issued cease-and-desist Lawsuits Criminal charges filed	Arizona’s gaming regulator issued Kalshi a cease-and-desist order (May 2025). Attorney General Kris Mayes filed criminal charges against Kalshi for running an illegal gambling business in Arizona without a license as well as for election wagering (March 17, 2026). This is the first criminal prosecution brought against a CFTC-registered prediction market operator. Kalshi had preemptively sued the State of Arizona (March 12, 2026). The CFTC filed lawsuits challenging such actions to reaffirm its exclusive jurisdiction (April 2, 2026).
Arkansas	Declared illegal	Attorney General Tim Griffin issued a formal opinion declaring that operators that offer sports-based contracts are engaging in illegal gambling if they do not have a sports betting license.
California	Tribal lawsuit Legislative activity	Three California tribes (Blue Lake Rancheria, Picayune Rancheria, Chicken Ranch Rancheria of Me-Wuk Indians) sued Kalshi and Robinhood (July 2025). A federal judge denied the tribes’ preliminary injunction. Republican legislator Kate Sanchez introduced a bill titled “The Political Reform Act of 1974” (CA AB 1840), referred to the Assembly Elections Committee, that would prohibit public and government officials from engaging in prediction market transactions using MNPI (introduced 2/11/2026). Democratic lawmakers Mia Bonta and Pilar Schiavo introduced a bill titled “Protecting Kids from Online Gambling Act” (CA AB 2617), referred to the Assembly Governmental Organization Committee, that would prohibit those under 21 from trading event contracts (introduced 3/17/2026). Governor Gavin Newsom issued an executive order banning state officials from using MNPI to bet on prediction markets (March 27, 2026).
Colorado	Legislative activity	Bipartisan Colorado lawmakers introduced a “A Bill for An Act Concerning Protections Against Abusive Practices in Sports Betting” (CO SB26-131), which is currently pending in the Senate Appropriations Committee after passing the Finance Committee, which creates certain requirements and prohibitions related to sports betting, such as banning prop bets, instituting deposit limits, and issuing certain marketing communication bans on operators (introduced 2/25/2026).
Connecticut	Issued cease-and-desist Lawsuits Legislative activity	The Department of Consumer Protection Gaming Division issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com, stating that prediction market platforms offering sport-based event contracts are illegal (December 2, 2025). A day later, Kalshi filed a suit against the agency, arguing its contracts, which are federally regulated derivatives, fall under the CFTC’s exclusive jurisdiction, and a federal judge temporarily blocked the agency from enforcing the order. Lawmakers introduced “An Act Prohibiting Prediction Market Platforms From Allowing Use By Or Advertising to Consumers Under the Age of Twenty-one” (CT HB5038), which restricts minors from trading event contracts and implements the governor’s budget recommendations (introduced February 13, 2026). The CFTC filed lawsuits challenging such actions to reaffirm its exclusive jurisdiction (April 2, 2026).
Hawaii	Legislative activity	HI is one of two states that have completely banned all forms of gambling. Democratic lawmakers introduced a bill (HI HB 2198) that amends the definition of gambling to include prediction markets that involve contracts based on the outcome of events related to catastrophe, contests, death, legislation, national security, people, politics, and sports, effectively making them illegal in the state.
Illinois	Issued cease-and-desist Legislative activity	The Illinois Gaming Board issued a number of cease-and-desist letters to platforms including Kalshi, Robinhood, Polymarket, Crypto.com and more (issued beginning January 2026 through April 2026). The CFTC filed lawsuits challenging such actions to reaffirm its exclusive jurisdiction (April 2, 2026). Democratic lawmaker Edgar Gonzalez introduced a bill titled the “Oversight and Regulation of Activity for Contracts Linked to Events (ORACLE) Act” (IL H 5059), which prohibits those under the age of 21 from trading event contracts, prohibits certain types of contracts, sets forth advertising restrictions, and requires operators to implement reasonable measures to detect fraud (introduced on February 4, 2026). Moreover, lawmakers introduced a bill amending the Sports Wagering Act (IL H 5142) to include prediction markets (introduced on February 5, 2026). Finally, democratic lawmakers Michael Hastings and Christina Castro introduced the “Prediction Markets Regulation and Taxation Act” (IL H 4168) which requires prediction market operators to obtain a $1,000,000 state license with a $1,000,000 annual renewal fee, as well as pay a privilege tax equal to 50% of a platform operator’s adjusted gross receipts from qualifying contracts placed by or with Illinois residents (introduced on March 3, 2026).
Iowa	Legislative activity Lawsuits	Republican lawmaker Mike Klimesh introduced a bill (IA SF 2470) that would require prediction markets to obtain a $10 million permit to operate in the state with a $100,000 annual renewal fee and impose a 20% tax on adjusted revenues. The bill additionally imposes a 20% excise tax on every purchase of an event contract, which would make it nearly impossible for prediction markets to operate in the state if enforced. The Iowa Senate passed the bill on March 31st, and it will now move to the State’s House of Representatives. Kalshi preemptively filed suit against Iowa’s Attorney General General Brenna Bird and the Iowa Racing and Gaming Commission, stating that there is “substantial risk” that enforcement action will be brought against Kalshi (filed on March 11, 2026).
Kentucky	Legislative activity	Republican legislator Jason Petrie introduced a bill titled “An Act Relating to Revenue Measures and Declaring an Emergency” (HY H 757) which among other things, imposes a 17.25% excise tax on the prediction market operator’s transaction fees (introduced February 25, 2026). The bill has been passed by both the KY House and Senate, and was delivered to the Governor (April 2, 2026). Republican legislators Michael Meredith and Matthew Koch introduced a bill titled “An Act Related to Gaming” (KY HB 904), which among other things, prohibits a horse racing track or gaming corporation from participating in or contracting with platforms that offer event contracts through predictive markets and imposes a 14.25% excise tax on on-track wagering revenue (introduced March 3, 2026). The bill has been passed by both the KY House and Senate, and was delivered to the Governor (April 2, 2026).
Louisiana	Declared illegal	Gaming Control Board chair Christopher Herbert sent a letter declaring that the “sporting event contracts and certain other event contracts” are “illegal gambling in violation of the Louisiana Criminal Code and Louisiana Gaming Control Law” (December 10, 2025).
Maryland	Issued cease-and-desist Lawsuits	MD Lottery and Gaming Control Commission issued a cease-and-desist order against Kalshi, Robinhood, and Crypto.com, stating that they are illegally offering sports-wagering in the state (April 7, 2025). Kalshi filed suit to stop MD’s Lottery and Gaming Control Agency and the MD Lottery and Gaming Control Commission from pursuing civil and criminal enforcement under the State’s gaming laws. The court denied Kalshi’s request for a preliminary injunction, finding that it failed to show that “when Congress enacted and amended the CEA, it intended to preempt state gaming laws when sports wagers are made on a platform like Kalshis’s” (August 1, 2025). Kalshi appealed to the Fourth Circuit Court of Appeals.
Massachusetts	Lawsuits	Attorney General Andrea Joy Campbell sued Kalshi for violating MA sports wagering law, seeking monetary and injunctive relief; the court granted MA’s motion for a preliminary injunction and denied Kalshi’s motion to dismiss (January 20, 2026). This is the first state initiated court victory. The appeals court granted Kalshi a stay without suggesting any view on the merits, allowing Kalshi to continue operating while litigation proceeds.
Michigan	Lawsuits	Coinbase filed a federal lawsuit, still pending, arguing the CEA gives the CFTC exclusive authority over prediction markets, preventing MI from imposing state gambling laws. Attorney General Dana Nessel filed a lawsuit against Kalshi seeking a permanent injunction, arguing that Kalshi enables Michigan residents to engage in sports betting disguised as event contracts and is in violation of Michigan’s Lawful Sports Betting Act (March 3, 2026). Polymarket quickly filed a suit to block enforcement of MI gaming law; the court denied Polymarket’s motion for a temporary restraining order and will move forward in considering its request for a preliminary injunction (filed March 4, 2026). Robinhood also filed a complaint for permanent injunction and declaratory relief, and a motion for preliminary injunction (filed March 9, 2026).
Minnesota	Legislative activity	Bipartisan lawmakers introduced a bill in the MN Senate (MN S 4511) which prohibits prediction market operators from offering contracts based on sports, contests or casino-style games, people, politics, catastrophe, death, and imposes criminal penalties for violation (introduced March 17, 2026). The bill also imposes advertising restrictions on these prohibited transactions, including the targeting of individuals 21. Bipartisan lawmakers introduced a bill in the MN House (MN H 4437) to achieve the same effects (introduced March 18, 2026).
Montana	Issued cease-and-desist Legislative activity	The Gambling Control Division of the Montana Department of Justice issued a cease-and-desist order against Kalshi, stating its operations constitute illegal gambling within the meaning of Montana law (March 26, 2025). Montana enacted a bill (MT SB 555) which makes all forms of online gambling illegal, explicitly targeting sweepstakes casinos and online prediction markets that operate without state regulation, and imposes felony charges on operators who offer event contracts in the state (took effect October 1, 2025). MT one of few states to have successfully codified a prohibition on prediction markets.
Nevada	Issued cease-and-desist Lawsuits	The Nevada Gaming Control Board (NGCB) issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com (March 4, 2025). Kalshi filed a federal lawsuit, and a U.S. District Court judge granted a preliminary injunction blocking Nevada’s enforcement on the basis that federal law preempted state gambling law (April 9, 2025). A federal judge then vacated that stay, ruling that Kalshi’s sport-related event contracts fell under NV gaming law (November 2025). Kalshi’s appeal to the Ninth Circuit was denied, as well as its emergency motion to Block Nevada from enforcement action (February 2026). The NGCB filed a lawsuit against Kalshi, and a Nevada judge granted the NGCB’s application for a temporary restraining order against Kalshi, prohibiting them from offering or facilitating sports, election, and entertainment related event contracts in Nevada (March 20, 2026). The judge extended the temporary ban and granted the NGCB’s request for a preliminary injunction, preventing Kalshi from operating in the state.
New Jersey	Issued cease-and-desist Legislative activity	The New Jersey Division of Gaming Enforcement issued a cease-and-desist against Kalshi (March 27, 2025). Kalshi filed suit and the federal district court granted it a preliminary injunction, preventing the state from enforcing its order (April 28, 2025). NJ appealed to the Third Circuit Court of Appeals. Democratic legislators Shirley Turner, John McKeon, and Joseph Cryan introduced a bill in the Senate (NJ SB 3692) that prohibits certain types of event markets, authorizes athletic event markets operating in compliance with State sports wagering regulations, and establishes a public awareness campaign to promote awareness among the general public of issues related to event markets (introduced February 24, 2026). Democratic legislators introduced a bill in the Assembly (NJ A 4689) to achieve the same effects (introduced March 16, 2026).
New York	Issued cease-and-desist Lawsuits Legislative activity	The New York State Gaming Commission issued a cease-and-desist order against Kalshi (October 24, 2025). Kalshi filed suit, seeking a permanent injunction and declaratory relief (filed October 26, 2025). Democratic lawmakers introduced a bill in the Assembly titled the “Oversight and Regulation of Activity for Contracts Linked to Events” or “ORACLE” Act which prohibits certain types of sensitive event contracts, prohibits consumers under 21 from trading contracts, addresses insider trading and market manipulation concerns, and institutes civil penalties for violation (introduced November 7, 2926). Democratic lawmaker Joseph Addabbo introduced a bill in the Senate (NY S 9414) to achieve the same effects (introduced March 10, 2026). Democratic lawmaker Jeremy Cooney introduced a bill (NY S 8889) which requires a prediction market operator to obtain a license from the Department of Financial Services, defines “prediction market” as any platform that allows participants to place wagers, trades, or financial positions on the outcome of future events, and provides standards of conduct and enforcement authority (introduced January 13, 2026). Democratic lawmaker Phillip Steck introduced a bill in the Assembly (NY A 9635) which restricts the use of prediction markets and sports wagering platforms by officers or employees of a state agency, members of the legislature, or legislative employees when using information acquired by such public officer in the course of their official duties (introduced January 21, 2026). Democratic lawmakers Phillip Steck and Yudelka Tapia introduced a bill in the Assembly titled the “No Gambling Ads for Kids Act” (NY A 10712) which prohibits platforms from advertising a service permitting gaming-related gambling, including predictive market wagering, to minors (introduced March 26, 2026).
Ohio	Issued cease-and-desist	OH Casino Control Commission issued cease-and-desist orders against Kalshi, Robinhood, and Crypto.com (August 25, 2025). Kalshi filed a lawsuit against OH, and U.S. District Court Chief Judge Sarah D. Morrison denied its request for an injunction, allowing the State to pursue enforcement action. Kalshi appealed to the Sixth Circuit Court of Appeals.
Pennsylvania	Other	Kevin F. O’Toole, the Executive Director of the PA Gaming Control Board, submitted written testimony to the CFTC expressing concern with prediction markets (April 2025). O’Toole also submitted a letter to PA’s two U.S. senators and 17 members of Congress, stating that prediction markets are “a significant threat” to PA’s gaming regulatory system and asking the representatives to urge the CFTC to address issues arising from a dual-track system where some sports gambling is regulated at the state level while sport-based event contracts fall under federal regulation.
Tennessee	Issued cease-and-desist Lawsuits Legislative activity	The Tennessee Sports Wagering Council issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com (January 9, 2026). Kalshi sued the State and the court granted its motion for a preliminary injunction, finding that event contracts are likely swaps under the CEA and federal law likely preempts TN’s regulatory efforts (February 19, 2026). TN has appealed to the Sixth Circuit Court of Appeals. Republican legislators Ferrell Haile and John Stevens introduced a bill in the Senate (TN SB 1992) which “creates the Class E felony offense of engaging in conduct intended to influence the outcome of an event while the person or another is a party to a contract with a prediction-market by which the person will benefit, directly or indirectly, from the occurrence of the outcome” (introduced January 22, 2026). Republican legislators Mary LIttleton and Jeremy Faison introduced a bill in the House (TN HB 2079) to achieve the same effect (introduced January 23, 2026).
Texas	Legislative activity	TX has not legalized sports betting. Lt. Governor Dan Patrick ordered the Senate State Affairs Committee to study these platforms ahead of the January 2027 session.
Utah	Legislative activity Lawsuits	Utah is one of two states that completely prohibits all forms of gambling. Governor Spencer Cox, who has declared that prediction markets are illegal in Utah, signed a bill (UT HB 243) into effect, which outlaws proposition bets, meaning “a gambling bet on an individual action, statistic, occurrence or non occurrence” placed on specific players or events during sporting events (March 25, 2026). Kalshi preemptively sued Utah, anticipating that the State will bring enforcement actions against it (filed February 23, 2026).
Vermont	Legislative activity	Bipartisan lawmakers introduced a bill (VT H 913) which prohibits certain types of event contracts related to sports, contests, natural persons, politics and campaigns, disasters, war, all-hazards, or death (introduced February 25, 2026).
Virginia	Legislative activity	Democratic lawmakers introduced a bill (VA HB 271) which establishes the Virginia Gaming Commission, and empowers them to conduct a study to evaluate the legal, economic, technological and public-policy implications of prediction markets (introduced January 9, 2026). Bipartisan lawmakers introduced a bill (VA SB 195) to achieve the same effects (introduced January 9, 2026). Democratic lawmakers introduced a bill (VA SB 609) which establishes the Virginia Lottery and Gaming Authority to oversee and regulate all forms of legal gambling (introduced January 14, 2026).
Washington	Declared illegal Lawsuits	Washington State Gambling Commission declared offering event contracts or participating in prediction markets illegal (December 9, 2025). Attorney General Nick Brown filed a lawsuit against Kalshi, arguing it violates the State’s Gambling Act and Consumer Protection Act, and seeking a permanent injunction (filed March 27, 2026). Robinhood preemptively filed a suit against WA, arguing that federal law preempts WA’s gambling statutes (filed March 30, 2026).
Wisconsin	Tribal lawsuit	The Ho-Chunk Nation filed a lawsuit against Kalshi, arguing it illegally operates on the Nation’s Indian lands in direct violation of the IGRA and the Nation’s Tribal-State Gaming Compact with WI, seeking declaratory and injunctive relief and monetary damages against all defendants (filed October 20, 2025).
AL, AK, DE, FL, GA, ID, IN, KS, ME, MS, MO, NE, NH, NM, NC, ND, OK, OR, RI, SC, SD, WV, WY	No Formal Action	*joined a 39-state coalition in filing an amicus brief supporting Nevada’s position that states retain the authority to regulate prediction markets as gambling in cases where Nevada has taken enforcement action against operators.

IIIb. Federal Legislative Action: Congress

Congress has also entered the regulatory debate, introducing 14 bills this year targeting prediction markets. The proposed legislation focuses on five main areas. First, five of the bills specifically target sports, which concerns contracts based on the outcome of sporting events which may overlap with state-regulated wagering. Second, four of the bills cover politics and government, relating to contracts involving elected and government officials or political events. Third, six of the bills focus on fraud and market manipulation, pertaining to insider trading, financial misconduct, and related enforcement concerns. Fourth, seven of the bills target sensitive events, prohibiting contracts based on war, assassination, terrorism, death or other related activities that present ethical concerns. Finally, three of the bills regard gambling and state and tribal authority, covering general gambling concerns, tribal-state compacts, and other regulatory authority issues.

The Prediction Markets Security and Integrity Act, introduced in the Senate by Senators Richard Blumenthal (D-CT) and Andy Kim (D-NJ), is one of the most comprehensive pieces of legislation introduced. In recognizing the trading of event contracts as gambling, it returns regulatory authority to State and tribal jurisdiction and bars individuals under the age of 21 from trading contracts. It also bans contracts based on sensitive events, prohibits trading on material nonpublic information, and requires enforcement measures such as reporting suspicious transactions to state regulators and sports organizations. Democratic legislators have introduced most of the bills, but there is a growing number of bipartisan efforts to regulate prediction markets. The Prediction Markets Are Gambling Act, introduced in the Senate by Senators John Curtis (R-UT) and Adam Schiff (D-CA), is a bipartisan effort to return prediction markets to state regulatory jurisdiction. It prohibits operators from listing contracts related to sporting events and casino-style games, including slot-machine games, video poker, blackjack, and more. The chart below provides a comprehensive timeline and overview of each piece of legislation introduced, including sponsors and current status.

Click the dropdown below to see a chart outlining Prediction Market legislation in Congress as of April 2, 2026.

Prediction Market Legislation in Congress (As of 4/2/2026)

Date Introduced	Bill Number and Chamber	Bill Name	Sponsor(s)	Description
January 9, 2026	H.R. 7004 (House)¹	Public Integrity in Financial Prediction Markets Act of 2026	Rep. Richie Torres (D-NY)	Prohibits “covered individuals” (including elected officials of the Federal Government, employees of the House or Senate, political appointees, employees of an Executive agency) or any individual with material nonpublic information from purchasing event contracts related to government policy, government action, or political outcomes.
February 10, 2026	H.R. 7477 (House)²	Fair Markets and Sports Integrity Act	Rep. Dina Titus (D-NV)	Prohibits registered entities from offering event contracts based on sporting events or casino-style games.
March 5, 2026	S. 4017 (Senate)³	End Prediction Market Corruption Act	Sen. Jeff Merkley (D-OR)	Prohibits certain Government officials from trading event contracts and requires financial reporting of event contracts for such individuals and their dependents.
March 5, 2026	H.R. 7840 (House)⁴	Event Contract Enforcement Act	Rep. Blake Moore (R-UT) and Rep. Salud Carbajal (D-CA).	Prohibits event contracts based on terrorism, assassination, war, gaming, illegal activity, election outcomes, and government activities; amends “gaming” to include sporting events, and allows States to exempt themselves from the prohibition on gaming contracts.
March 10, 2026	S. 4035 / H.R. 7942 (Bicameral)⁵	DEATH BETS Act	Sen. Adam Schiff (D-CA) and Rep. Mike Levin (D-CA)	Prohibits event contracts based on terrorism, assassination, war, death, or any similar activity.
March 11, 2026	S. 4060 (Senate)⁶	Prediction Markets Security and Integrity Act	Sen.Richard Blumenthal (D-CT) and Sen. Andy Kim (D-NJ)	Returns regulatory authority of prediction markets to State as it recognizes the trading of event contracts as gambling, prohibits individuals from under 21 from trading event contracts, and create a number of safeguards to prevent abuse and fraud.
March 17, 2026	S. 4115 / H.R. 7955 (Bicameral)⁷	Banning Event Trading on Sensitive Operations and Federal Functions (BETS OFF) Act	Sen. Chris Murphy (D-CT), Sen. John Hickenlooper (D-CO), and Rep. Greg Casar (D-TX)	Prohibits specific types of event contracts based on terrorism, assassinatin, war, or any other action taken by any government official.
March 23, 2026	S. 4160 (Senate)⁸	Prediction Markets Are Gambling Act	Sen. John Curtis (R-UT) and Sen. Adam Schiff (D-CA)	Prohibits registered entities from offering event contracts based on sporting events or casino-style games.
March 25, 2026	H.R. 8076 (House)⁹	Preventing Real-time Exploitation and Deceptive Insider Congressional Trading (PREDICT) Act	Rep. Adrian Smith (R-NE) and Nikki Budzinski (D- IL)	Prohibits Members of Congress, their spouses and dependent children; the President and Vice President; and political appointees from trading on the outcomes of political events, policy decisions, and other government actions on prediction markets.
March 25, 2026	S. 4188 (Senate)¹⁰	Public Integrity in Financial Prediction Markets Act of 2026	Sen. Elissa Slotkin (D-MI), Sen. Todd Young (R-IN), Sen. John Curtis (R-UT), and Sen. Adam Schiff (D-CA)	Prohibits federally elected officials and government employees from using insider information to bet on a prediction market contract.
March 26, 2026	H.R. 8123 / S. 4226 (Bicameral)¹¹	STOP Corrupt Bets Act	Sen. Jeff Merkley (D-OR) and Rep. Jamie Raskin (D-MD)	Prohibits event contracts on elections, government actions, sports, and military actions.

H.R.7004 – 119th Congress (2025-2026): Public Integrity in Financial Prediction Markets Act of 2026, H.R.7004, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/7004.↩︎
H.R.7477 – 119th Congress (2025-2026): Fair Markets and Sports Integrity Act, H.R.7477, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/7477.↩︎
S.4017 – 119th Congress (2025-2026): End Prediction Market Corruption Act, S.4017, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/senate-bill/4017.↩︎
H.R.7840 – 119th Congress (2025-2026): Event Contract Enforcement Act, H.R.7840, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/7840.↩︎
S.4035 – 119th Congress (2025-2026): DEATH BETS Act, S.4035, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/senate-bill/4035.↩︎
S.4060 – 119th Congress (2025-2026): Prediction Markets Security and Integrity Act of 2026, S.4060, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/senate-bill/4060.↩︎
.4115 – 119th Congress (2025-2026): BETS OFF Act, S.4115, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/senate-bill/4115.↩︎
S.4160 – 119th Congress (2025-2026): Prediction Markets Are Gambling Act, S.4160, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/senate-bill/4160.↩︎
H.R.8076 – 119th Congress (2025-2026): To amend chapter 131 of title 5, United States Code, to prohibit covered individuals from trading on prediction markets, and for other purposes, H.R.8076, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/8076.↩︎
S.4188 – 119th Congress (2025-2026): A bill to prohibit a covered individual from engaging in covered transactions involving prediction market contracts, and for other purposes, S.4188, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/senate-bill/4188.↩︎
H.R.8123 – 119th Congress (2025-2026): To amend the Commodity Exchange Act to prohibit certain event contracts on prediction markets, and for other purposes, H.R.8123, 119th Cong. (2026), https://www.congress.gov/bill/119th-congress/house-bill/8123. ↩︎

IIIc. Federal Regulatory Action: CFTC

The CFTC, determined to retain exclusive jurisdiction over prediction markets, has sided with operators over States. Prediction market platforms argue that as derivatives, they fall under the CFTC’s exclusive jurisdiction under the CEA and maintain that their operations are materially different from gambling. The CFTC recently issued guidance, instructing operators to strengthen monitoring to detect fraud and financial misconduct, and both Kalshi and Polymarket have since taken measures to reinforce detection.⁶⁰

Commission Chairman Michael Selig contends, arguing that Congress gave the CFTC exclusive jurisdiction over contracts based on commodities, defined broadly, leaving prediction markets to fall within such meaning.⁶¹ In an amicus brief submitted in the U.S. Court of Appeals for the Ninth Circuit, the CFTC argued that the CEA defines “swap” broadly to include contracts based on financial, economic, or commercial interests, as well as agreements contingent on the occurrence or nonoccurrence of events. Such expansive definition encompasses event contracts. Additionally, the CFTC argues that the CEA was intended to provide the Commission with exclusive authority over commodity derivatives exchanges, even as it evolves, and that federal law preempts state action.⁶² However, the CFTC clearly acknowledges the contentious regulatory environment, as demonstrated by its recent issuance of an Advanced Notice of Proposed Rulemaking, which seeks public comment on “regulations that apply to prediction markets, the types of event contracts that may be prohibited as contrary to the public interest, cost-benefit considerations related to prediction markets, and other topics.”⁶³ Comments must be received by April 30th.⁶⁴

Nevertheless, Chairman Selig has made it clear that CFTC will work to retain sole jurisdiction, stating: “to anyone seeking to challenge the Commission’s authority over these contracts, I want to make it clear: we’ll see you in court.”⁶⁵ Selig is visibly determined: on April 2, the Commission filed lawsuits against Arizona, Connecticut, and Illinois, challenging their legislative and enforcement actions.⁶⁶ Federal regulators, at least under the Trump Administration, appear resolved to safeguard their exclusive regulatory authority.

IV. Placing a Bet: The Future of Prediction Market Regulation

While Congress could step in to either clarify the scope of the CFTC’s authority over prediction markets, either reinforcing or restricting it, none of the 14 bills introduced thus far have progressed beyond committee referral. Moreover, President Trump would likely veto any legislation that restricts prediction markets, given that his social media platform, Truth Social, is launching its own prediction market service and his son, Donald Trump Jr., serves as a strategic advisor to both Kalshi and Polymarket.⁶⁷

Thus, with conflicting federal and state rulings on prediction markets, it is likely that the Supreme Court will weigh in, raising the question of how the court might balance federal authority under the CEA against states’ traditional power to regulate gambling and sports wagering.

The central legal issue is whether prediction markets should be classified as financial derivatives under the CFTC’s jurisdiction or as illegal gambling subject to state and tribal gaming laws. Operators have consistently argued that their contracts are swaps or derivatives, allowing them to build an administrative record that courts may rely on when interpreting their regulatory classification. In the U.S., classification is shaped not only by the nature of the product itself, but also the broader administrative record, including public filings, testimony, and agency correspondence, which can influence how courts evaluate regulatory decisions.⁶⁸

Though courts have been divided, such administrative record may ultimately carry more weight than the lack of meaningful distinctions experienced by users. Thus, if prediction markets continue to be classified as derivatives under the CFTC’s authority, then the question turns to federal preemption, or “the principle that federal law can, in certain circumstances, supersede state law.”⁶⁹ There are three types of federal preemption: (1) express preemption, (2) field preemption, and (3) conflict preemption, though only field and conflict preemption are relevant here, since express preemption would require Congress to have clearly stated that federal law overrides state regulation.⁷⁰ Kalshi’s argument, as well as the CFTC’s, relies on field preemption, contending that Congress granted the CFTC exclusive jurisdiction over swaps, broadly defined to encompass transactions on DCMs, even as these financial instruments continue to evolve. On the other hand, states have argued that conflict preemption is more appropriate, to which federal law overrides state law only where compliance with both is impossible or where state regulation poses a clear obstacle to federal objectives.⁷¹ The CFTC and operators dispute this, arguing the importance of nationwide conformity in prediction market regulation, but courts have largely rejected this, regarding states’ longstanding power to regulate gambling within their individual jurisdictions.⁷² Maryland’s ongoing litigation is an example of an instance where a federal court accepted the State’s conflict preemption argument, noting that “Congress did not clearly intend to displace state authority over gambling and that Kalshi could theoretically comply with both federal and state regimes.”⁷³ Yet, as previously discussed, other federal courts have ruled in favor of Kalshi’s field preemption argument.

Ultimately, if federal law dominates when congress intends it to, the Supreme Court must decide if Congress intended to include prediction markets, which closely mirror gambling and gaming, within the CFTC’s jurisdiction. I believe that the Supreme Court would likely uphold Kalshi and the CFTC’s field preemption argument, while carving out sports-related contracts for separate treatment, requiring them to comply with both federal and state regulations, given the challenge of demonstrating clear economic value for these markets and the increasing concerns of state legislators and regulators. However, as more appellate courts begin considering these questions, the future of how the Supreme Court might rule will become more clear.

V. Conclusion: Consumer Interests First

With the recent suits from the CFTC against Arizona, Connecticut, and Illinois, it is clear the Commission is not backing down. At the same time, a growing wave of cease-and-desist orders, litigation, enforcement actions, and newly introduced legislation at both the state and federal levels shows that states are not retreating either. The odds are certainly unclear, but one thing is certain: a future Supreme Court ruling or shift in the regulatory environment will reshape how prediction markets operate. These changes will have meaningful implications for consumers, affecting whether those under 18 can trade event contracts, how such platforms are advertised, and which types of prediction markets are legally accessible. Beyond sports, it is also increasingly likely, and necessary, that legislators act to address concerns over government officials using material nonpublic information for personal gain.

A Democratic White House in 2028 could shift the regulatory landscape, with a Democratic-led CFTC potentially cracking down on prediction market platforms as it did during the Biden Administration. Until then, however, one thing is clear: states are losing out. The current regulatory framework leaves them sidelined, unable to fully benefit from or influence these markets. Such current landscape highlights a core federalism challenge, as both states and the federal government both claim authority over prediction markets.

With the future of prediction markets increasingly uncertain, the conversation must return to what matters most: protecting consumers. In addition to the increasing number of lawsuits Kalshi faces from states and tribal governments, five additional complaints have been filed by individuals alleging that the platform operates as an illegal service that is worsening gambling addiction, four of which are seeking a class-action status.⁷⁴

An academic term, “gamblification,” can be applied to prediction markets, describing how digital platforms combine the “formal structure of financial instruments with the engagement architecture of betting environments: real-time pricing, low minimum participation thresholds, rapid contract resolution, and social features that broadcast outcomes and amplify the experience of winning.”⁷⁵ Prediction market platforms like Kalshi have been incredibly diligent at managing their classification status.⁷⁶ Perhaps regulators should focus less on classification, and more on designing rules that directly mitigate consumer harm, regardless of how the product is classified.⁷⁷

Edited by Annelise Dram and Tiffany Valkova

About the Author

Gabrielle Valencia is a fifth-year student at Northeastern University pursuing a B.S. in International Affairs and International Business, with a minor in Law and Public Policy. She serves as a Staff Writer for the Northeastern University Undergraduate Law Review, where she previously authored a note examining the impact of the international intellectual property regime on access to education. She has completed co-ops at Ropes & Gray LLP, Wellington Management, and MFS Investment Management, and has conducted legal research for the U.S. Committee for Refugees and Immigrants. In addition to her writing, Gabrielle holds a leadership role in Internal Development and External Affairs, where she supports the growth of NUULR by fostering member writing development and strengthening organizational outreach. Her academic interests center on international law, particularly at the intersection of law and development and human rights. She is also interested in regulatory law and constitutional law.