Where Are Prediction Markets Legal in the U.S.? State-by-State Guide

Prediction Market Availability by State

Here's a look at which states prediction markets are available in, including sports and non-sports contracts, as well as which have tried to pass legislation or sent cease-and-desist letters to operators.

The Core Legal Dispute on the Legality of Prediction Markets

The legal fight between prediction-market operators and state gambling regulators comes down to one question. Do event contracts traded on a federally regulated exchange fall under federal commodities law, or can states still treat them as gambling products?

Prediction-market operators argue the answer starts with federal law. Their position is that event contracts listed on a CFTC-regulated exchange are financial products, and federal law gives the CFTC authority over that market.

States argue that the structure on paper does not change the substance of the product. If a contract asks who will win a game and pays out based on the final result, many states view it as a sports wager in practice.

That is where the real conflict starts. States have built licensing systems, tax rules, and compliance frameworks around sports betting. Prediction markets argue federal exchange law controls the product, while states argue sports-outcome contracts should still fall under state gambling rules.

>> Find a Trusted Option: Best Prediction Market Apps

State-by-State Legal Status of Prediction Markets

States That Have Taken the Hardest Action Against Prediction Markets

Arizona: Criminal Charges Filed

Arizona has taken the hardest line of any state so far. On March 17, 2026, Attorney General Kris Mayes filed a 20-count criminal case against Kalshi, making Arizona the first state to bring criminal charges against a prediction-market operator.

The case includes 16 counts tied to operating an unlicensed wagering business and 4 counts tied to election wagering. Arizona says the contracts covered sports, player props, and election-related markets that state law does not allow.

The fight escalated fast. A federal judge later paused the criminal case after the CFTC sued Arizona and argued the state was trying to regulate products that fall under federal oversight.

Right now, Arizona remains the most aggressive test case in the state-versus-federal battle over prediction markets. The charges are on pause for now, but the broader legal fight is still active.

• Action: Criminal charges and cease-and-desist action
• Status: Criminal case paused by federal court; wider litigation is still ongoing

Arkansas: Attorney General Opinion Against Kalshi

Arkansas has not filed a lawsuit or sent a cease-and-desist, but the state has already signaled its position. In 2025, the Arkansas Attorney General’s Office issued a formal legal opinion saying Kalshi’s prediction markets violate state law.

The opinion said the platform lets users bet on future events and made clear that calling the product a prediction market does not change the legal analysis. Even without formal enforcement, the opinion gives Arkansas a legal basis to act later if the state chooses to escalate.

For now, Arkansas is more of a warning sign than an active court fight. But the state has already put its legal view on the record, which raises the risk of future enforcement.

• Action: Attorney General's legal opinion
• Status: No formal enforcement yet; regulatory risk remains elevated

Connecticut: Cease-and-Desist to Multiple Platforms

Connecticut moved against several platforms at once. On December 3, 2025, the Department of Consumer Protection sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com. On January 27, 2026, the state added Polymarket US.

Connecticut said the platforms were offering unlicensed sports wagering under state law. The state also warned that violations could carry criminal penalties.

Kalshi then sued Connecticut in federal court and won temporary injunctive relief. For now, that relief blocks the state from enforcing its position against Kalshi while the case moves forward.

The federal government also stepped in. On April 2, 2026, the CFTC sued Connecticut and asked for a declaratory judgment that exclusive jurisdiction belongs to the federal government.

Connecticut is also part of the broader industry fight. Coinbase filed its own preemptive federal lawsuit against the state in December 2025 ahead of a planned prediction-market launch.

• Action: Cease-and-desist against Kalshi, Robinhood, Crypto.com, and Polymarket US
• Status: Federal enforcement paused for Kalshi; CFTC litigation ongoing

Hawaii: Broad Ban Bill Moving Through Legislature

Hawaii has pursued the legislative route rather than filing a lawsuit or seeking a cease-and-desist order. In 2026, lawmakers introduced HB 2198, a bill that would expand the state’s definition of gambling to include prediction markets.

The bill is broader than many state actions because it is not limited to sports. It covers prediction event contracts tied to catastrophe, contests, death, legislation, national security, people, politics, and sports.

That makes Hawaii one of the clearest examples of a state trying to address the full prediction-market model through statute, not just sports contracts that look like sportsbook bets.

• Action: Pending legislation to expand the definition of gambling
• Status: Bill pending; would target sports and non-sports prediction markets

Illinois: Cease-and-Desist + CFTC Sued the State

Illinois moved against several prediction-market platforms at once. In April 2025, the Illinois Gaming Board sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com. The state later added Polymarket US in January 2026.

Illinois said the platforms could not offer sports event contracts to residents without a license from the Illinois Gaming Board. The letters warned of possible civil and criminal penalties if the platforms kept operating.

The legal fight then expanded beyond state enforcement. On April 2, 2026, the CFTC and DOJ sued Illinois and asked the court to block the state from applying gambling laws to CFTC-registered exchanges.

Illinois is also dealing with private litigation. Veridis Management is backing class-action lawsuits against Kalshi, Robinhood, and Webull under state gambling recovery laws. The suits are aimed at recovering user losses.

• Action: Cease-and-desist; private class-action lawsuits
• Status: CFTC sued the state on preemption grounds; private litigation remains active

Iowa: Kalshi Filed Preemptive Suit

Iowa has not become one of the highest-profile fights yet, but the state is now part of the broader legal map. In March 2026, Kalshi filed a federal lawsuit against Iowa Attorney General Brenna Bird and state racing and gaming officials.

Kalshi’s lawsuit asks the court to block Iowa from taking enforcement action and argues that federal commodities law preempts Iowa gambling and election-wagering laws as applied to its event contracts.

Iowa lawmakers have also considered event-contract legislation. The National Conference of State Legislatures lists Iowa bills that would require a permit to conduct event-driven contract business in the state and impose a tax on adjusted revenues.

• Action: Preemptive lawsuit by Kalshi; pending legislation
• Status: Federal lawsuit active; state legislation pending

Kentucky: Tax and Horse Racing Restrictions Enacted

Kentucky has taken a different path from states trying to ban prediction markets outright. Instead of only challenging the model in court, the state enacted legislation aimed at taxing and limiting parts of the market.

In 2026, Kentucky enacted a bill imposing a 14.25% excise tax on prediction-market operators’ transaction fees. The state also enacted a separate measure that prohibits horse racing tracks or associations from participating in or contracting with platforms that offer event contracts through prediction markets.

That does not look like a full ban. But it does show Kentucky trying to pull prediction markets into the state’s gaming and tax framework rather than treating them as a purely federal product.

• Action: Excise tax and horse racing partnership restrictions
• Status: Legislation enacted; platforms still face added state-level limits

Maryland: Cease-and-Desist Upheld by Court

Maryland moved against Kalshi in April 2025 by sending a cease-and-desist order over its sports contracts. State regulators argued the contracts were effectively sports wagers under Maryland law.

Kalshi challenged the order in federal court, but the state won the first round. In August 2025, U.S. District Judge Adam Abelson denied Kalshi’s request for a preliminary injunction.

The court said Congress had not clearly shown an intent to displace state gambling authority through the Commodity Exchange Act. The court also said Kalshi could theoretically comply with both the federal framework and Maryland’s state rules.

Kalshi has appealed that ruling to the Fourth Circuit. For now, Maryland is continuing to enforce its position against the platform.

• Action: Cease-and-desist; court denied Kalshi’s injunction request
• Status: State enforcement ongoing; Kalshi appeal to the Fourth Circuit pending

Massachusetts: Preliminary Injunction Against Kalshi

Massachusetts took a different route than most states. Instead of waiting for a cease-and-desist fight, the state sued Kalshi directly in late 2025. Attorney General Andrea Campbell brought the case in state court.

A Suffolk County Superior Court judge then issued a preliminary injunction in January 2026. The order blocked Kalshi from offering sports event contracts to Massachusetts residents without a state license.

The court rejected Kalshi’s preemption argument. In the court’s view, federal commodities regulation and state gambling authority can exist at the same time.

The injunction did not stay in place without a fight. The Massachusetts Appeals Court temporarily stayed the order and moved the case onto an expedited schedule.

The case is now expected to reach the Massachusetts Supreme Judicial Court. That makes Massachusetts one of the most important state-court tests in the broader legal fight over prediction markets.

• Action: State-initiated lawsuit; preliminary injunction
• Status: Injunction stayed pending expedited appeal; heading to the Massachusetts Supreme Judicial Court

Michigan: Coinbase Filed Preemptive Suit

Michigan took a similar position to Illinois and sent cease-and-desist letters to prediction-market operators. The state argued that sports event contracts could not be offered without complying with Michigan’s gambling rules.

Coinbase responded before its own product launch. In December 2025, it filed a preemptive federal lawsuit against Michigan and argued that state interference would be preempted by federal law.

Polymarket also filed a federal case against Michigan in March 2026.

Michigan has not become as central as states like Arizona, Ohio, or New Jersey, but it is still part of the wider state-by-state push against prediction markets.

• Action: Cease-and-desist
• Status: Coinbase lawsuit ongoing

Minnesota: First State Prediction Market Ban

Minnesota has gone further than most states. In May 2026, Gov. Tim Walz signed a state law that would make operating or assisting in the operation of a prediction market a criminal felony.

The law is not limited to sports. The CFTC said the Minnesota law reaches weather-related event contracts and other CFTC-regulated markets, making it the broadest state prediction-market ban to date.

The federal government responded almost immediately. The CFTC sued Minnesota and asked for a preliminary injunction to stop the law from taking effect on August 1, 2026.

That makes Minnesota one of the most important states to watch. It is the first state to pass a broad ban, but that ban is already facing a federal preemption challenge.

• Action: State law banning prediction markets; CFTC lawsuit
• Status: Ban signed; CFTC seeking to block enforcement before August 1, 2026

Montana: Cease-and-Desist Escalated

Montana and Kalshi reached a temporary non-enforcement arrangement in 2025. That arrangement ended in 2026, when Montana sent another cease-and-desist over the platform’s sports event contracts.

Kalshi responded by filing a new federal lawsuit. So Montana moved from a temporary pause to an active legal fight once the state renewed its enforcement push.

• Action: Second cease-and-desist
• Status: New federal lawsuit filed by Kalshi; dispute remains active

Nevada: Sports, Election and Entertainment Contracts Blocked

Nevada moved early against event contracts. In March 2025, the Nevada Gaming Control Board sent Kalshi a cease-and-desist letter, arguing that its sports and election contracts violated state law and required a Nevada gaming license.

Age rules were part of the conflict, too. Nevada requires gamblers to be 21, while Kalshi’s federal platform standard allows users who are 18 and older.

Nevada also got support in court. A federal district court ruled for the state in November 2025 and rejected Kalshi’s preemption argument. In March 2026, the Ninth Circuit denied Kalshi’s request for a stay.

The restriction is broader than sports. A Nevada court order blocked Kalshi from offering event-based contracts tied to sports, elections, and entertainment without state gaming approval.

The appeal is still moving forward. The Ninth Circuit heard oral arguments on April 16, 2026, and the three-judge panel appeared receptive to Nevada’s position.

Nevada also filed a civil enforcement action against Polymarket in January 2026.

For now, Nevada residents with state addresses are blocked from accessing Kalshi’s restricted contracts. The restriction uses registration-based controls rather than IP geofencing.

Nevada’s position has had ripple effects. DraftKings and FanDuel both gave up Nevada licenses or applications while pursuing prediction-market products.

• Action: Cease-and-desist; court-ordered restriction
• Status: Sports, election and entertainment contracts blocked for Nevada residents; Ninth Circuit ruling pending

New Jersey: Blocked, then the Federal Appeals Court Sided with Kalshi

New Jersey moved early against Kalshi. In March 2025, the state sent a cease-and-desist letter and gave the company 24 hours to stop serving residents. The state argued Kalshi’s contracts violated New Jersey gambling law, including rules around college sports betting.

Kalshi sued in federal court and won a preliminary injunction on April 28, 2025. New Jersey appealed, but the Third Circuit ruled 2-1 in Kalshi’s favor in April 2026. The majority said sports event contracts qualify as swaps under the Commodity Exchange Act and fall under the CFTC’s exclusive jurisdiction.

The dissent saw the product very differently. In that view, Kalshi’s contracts looked almost the same as sportsbook offerings from DraftKings or FanDuel. A group of 34 state attorneys general also backed New Jersey’s position through an amicus brief.

For now, New Jersey stands as Kalshi’s biggest appellate win. The ruling gave the company stronger support at the federal appeals level than it had received in most state fights.

• Action: Cease-and-desist
• Status: The Third Circuit ruled 2-1 in Kalshi’s favor; New Jersey may appeal further

New York: Cease-and-Desist Issued; Private Litigation Active

New York has also moved against prediction markets. The New York State Gaming Commission sent Kalshi a cease-and-desist, and Kalshi responded by filing a federal lawsuit against the regulator.

For now, state enforcement has been temporarily paused while the case moves through federal court. That puts New York into the same broader group of states where the main fight is shifting from regulators to judges.

New York is also dealing with private litigation. A class-action lawsuit filed in November 2025 accused Kalshi of deceptive trading practices.

Regulators in New York have raised a separate issue as well. The Department of Financial Services has flagged possible BitLicense questions tied to digital asset activity on prediction-market platforms.

New York lawmakers have also introduced several prediction-market bills, including proposals that would create licensing requirements, restrict public officials from using prediction markets, and limit gambling-related ads to minors.

• Action: Cease-and-desist; private class-action lawsuit; pending legislation
• Status: State enforcement temporarily paused; active litigation and legislation

North Carolina: Prediction Market Ban Bill Introduced

North Carolina has not taken the same kind of enforcement action as states like Nevada or Ohio, but lawmakers have started moving on the issue. In May 2026, legislators introduced House Bill 1171, titled “Prohibit Gambling in Prediction Markets.”

The bill would amend the state’s gambling law so that it applies to online markets or platforms offered to North Carolina residents, including prediction markets. It defines a prediction market as a market or platform where a person can bet on the outcome of a future event.

That means North Carolina is not a no-action state anymore. It has not passed a ban, but the state is actively considering one.

• Action: Prediction-market ban bill introduced
• Status: Legislation pending; no final ban yet

Ohio: $5 Million Fine Issued

Ohio has taken the most aggressive financial approach so far. On April 14, 2026, the Ohio Casino Control Commission issued a $5 million civil fine notice to Kalshi. It is the largest state-level financial penalty proposed against a prediction-market operator to date.

The dispute had already been building. Ohio sent cease-and-desist orders in 2025, and Kalshi responded by filing its own federal lawsuit in October 2025. In March 2026, Judge Sarah Morrison denied Kalshi’s request for a preliminary injunction.

Ohio then escalated further. State regulators threatened to revoke gambling licenses from operators that partner with Kalshi, including partners outside Ohio. The fine notice followed Kalshi’s continued refusal to comply with the state’s enforcement position.

Ohio said Kalshi was operating without a state sports-betting license. Regulators also pointed to the lack of a $1.5 million licensing fee, nonpayment of Ohio’s 20% sports-betting tax, and the fact that Kalshi allows users who are 18 and older, while Ohio requires users to be at least 21.

Ohio has also said more than 35,000 Kalshi users are located in the state. Kalshi has appealed to the Sixth Circuit and continues to serve Ohio users for now. The hearing deadline on the fine notice is May 14, 2026.

• Action: Cease-and-desist, federal lawsuit, $5 million fine notice
• Status: Fine notice issued; Kalshi's appeal to the Sixth Circuit is pending

Rhode Island: Sports Contract Lawsuit Filed

Rhode Island is one of the newest states to move directly against prediction markets. In May 2026, Attorney General Peter Neronha sued Kalshi and Polymarket, arguing that their sports-related event contracts amount to sports betting under Rhode Island law.

The lawsuit seeks a declaration that the sports contracts constitute gambling, casino gaming, and online sports wagering, subject to the Rhode Island State Lottery’s regulation and control.

The state is not trying to ban every possible prediction market in that lawsuit. The case is focused on sports-related event contracts, which is the same part of the market driving most state-level pushback.

• Action: Lawsuit against Kalshi and Polymarket
• Status: Active litigation focused on sports-related event contracts

Tennessee: Blocked, then Unblocked

Tennessee moved against multiple platforms in late 2025. The state’s Sports Wagering Council sent cease-and-desist letters to Kalshi, Polymarket, and Crypto.com, accusing all three of offering unlicensed sports wagering. It was also the first state action aimed at Polymarket.

Kalshi sued on January 9, 2026, and quickly won relief in federal court. Judge Aleta Trauger issued a temporary restraining order three days later, then turned it into a preliminary injunction on February 19, 2026.

That ruling was a major win for Kalshi. Judge Trauger said Kalshi’s sports event contracts were likely swaps under the Commodity Exchange Act and found that federal law likely preempts Tennessee’s sports wagering statutes.

For now, Tennessee stands out as the strongest early court win for Kalshi at the state level. The ruling gave the platform its clearest judicial support yet on the preemption argument.

• Action: Cease-and-desist
• Status: Federal preliminary injunction in Kalshi’s favor; platforms continue operating

Utah: Kalshi Filed Preemptive Suit

Utah never got as far as a cease-and-desist fight. In February 2026, Kalshi filed a preemptive federal lawsuit before the state took formal enforcement action.

The case has not turned into an active courtroom battle yet. Both sides agreed to pause the proceedings while they discussed the dispute.

Utah is a quieter example than states like Arizona or Ohio, but it still shows how prediction-market operators are trying to get ahead of state action before regulators move first.

• Action: Preemptive lawsuit by Kalshi
• Status: On hold by mutual agreement

Washington: State Lawsuit Against Kalshi

Washington has also moved into active litigation. In March 2026, Attorney General Nick Brown filed a lawsuit against Kalshi, arguing that the company is operating and advertising illegal gambling in the state.

Washington’s complaint says Kalshi is trying to avoid the state’s gambling laws by calling itself a prediction market. The state is seeking to stop Kalshi from operating in Washington, recover money lost by residents, and assess penalties.

Kalshi has argued that its event contracts are federally regulated derivatives. So Washington is now part of the same state-versus-federal fight playing out across the country.

• Action: State lawsuit against Kalshi
• Status: Active litigation; Kalshi remains available while the case moves forward

Wisconsin: Multi-Platform Lawsuit

Wisconsin took the broadest state-level approach so far. In April 2026, the state sued Kalshi, Polymarket, Robinhood, Coinbase, and Crypto.com in one sweep. No other state has gone after that many prediction-market platforms at once.

Wisconsin’s argument was simple. The state said event contracts are wagers under Wisconsin law, not a separate product just because the platforms use different labels. Regulators also pointed to the platforms’ own marketing to support that view.

The state cited examples from both sides of the market. Wisconsin pointed to Kalshi’s ads, calling itself “The First Nationwide Legal Sports Betting Platform,” and to Polymarket’s language describing itself as a place where users can bet on future events.

The legal fight in Wisconsin did not start there. In August 2025, the Ho-Chunk Nation filed its own federal lawsuit against Kalshi and Robinhood. The tribe argued the platforms violated the Indian Gaming Regulatory Act and tribal-state gaming compacts.

The federal government is now involved, too. The CFTC has sued Wisconsin as part of the wider fight over whether states can apply gambling laws to federally regulated event-contract platforms.

Because Wisconsin’s case targets multiple platforms and frames event contracts broadly as wagers, the state’s challenge is not limited as neatly to one operator or one narrow product category.

• Action: State lawsuits against five platforms; tribal lawsuit
• Status: Active litigation; CFTC suing the state

States Currently Available (No Formal Action)

As of May 2026, some states have not taken formal action against prediction markets at the state level. In those states, platforms such as Kalshi, Polymarket, and Crypto.com continue to operate without a documented state enforcement block.

California needs a separate note. The state has not taken formal enforcement action of its own, but tribal litigation is active. California tribes, led by the California Nations Indian Gaming Association, have sued Kalshi in federal court and argued that prediction markets violate the Indian Gaming Regulatory Act and tribal-state compacts.

California has become even more important because DraftKings launched prediction market products there, and FanDuel is expected to follow. So California is still available, but the legal pressure there is higher than in most other states without formal state enforcement.

A large share of prediction market volume is believed to come from California, Texas, and Georgia. None of those states has taken formal enforcement action so far, but no-action status does not guarantee long-term availability.

States without documented formal action as of May 2026:

• Alabama
• Alaska
• California
• Colorado
• Delaware
• Florida
• Georgia
• Idaho
• Indiana
• Kansas
• Louisiana
• Maine
• Mississippi
• Missouri
• Nebraska
• New Hampshire
• New Mexico
• North Dakota
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Texas
• Vermont
• Virginia
• West Virginia
• Wyoming

The Tribal Gaming Dimension

Tribal gaming groups have become one of the strongest forces pushing back against prediction markets. In some states, tribal opposition may matter just as much as state regulatory action.

The issue goes beyond standard gambling enforcement. Tribal operators hold exclusive gaming compacts in states such as California, Wisconsin, and Oklahoma. Prediction markets create a direct challenge because they can offer event-based products without tribal approval or revenue-sharing terms.

Tribal leaders have made the stakes clear. The California Nations Indian Gaming Association, led by Chair James Siva, has described prediction markets as a threat to tribal sovereignty. Tribal groups argue that prediction markets cut into rights they negotiated through tribal-state compacts over many years.

The legal fight is already active. Tribal governments in California and Wisconsin have filed federal lawsuits arguing that prediction markets violate the Indian Gaming Regulatory Act, or IGRA, along with existing tribal-state gaming compacts.

The political push has expanded beyond tribal litigation. The Indian Gaming Association joined the American Gaming Association in a national lobbying effort against the prediction-market model.

Support for the state side has been broad as well. In the New Jersey Third Circuit case, more than 34 state attorneys general and the AGA filed amicus briefs backing state authority. That level of alignment shows how unified the traditional gaming industry has become against prediction markets.

Federal Legislative Activity Around Prediction Markets

Congress has already started responding to prediction markets. Several federal bills were introduced in early 2026, but none had passed as of May 2026. 

Here's a look:

• The BETS OFF Act would ban prediction market contracts tied to government actions, terrorism, war, and assassination. Sen. Chris Murphy and Rep. Greg Casar introduced the bill. Its scope is narrower than the broader proposals aimed at sports and elections.
• The Prediction Markets Are Gambling Act, introduced on March 23, 2026, takes direct aim at sports contracts. Sen. Adam Schiff and Sen. John Curtis proposed amending the Commodity Exchange Act to stop CFTC-registered platforms from listing contracts tied to athletic competitions at any level, including amateur, college, and professional sports.
• The STOP Corrupt Bets Act, introduced on March 26, 2026, goes further. Sen. Jeff Merkley, Sen. Elizabeth Warren, Sen. Richard Blumenthal, Sen. Chris Van Hollen, Sen. Sheldon Whitehouse, and Rep. Jamie Raskin backed a bill to ban prediction-market contracts tied to elections, sports, war, and government actions.

Other federal proposals focus on narrower parts of the market.

• The Fair Markets and Sports Integrity Act would place broader restrictions on sports event contracts and add integrity protections aimed at market manipulation.
• The PREDICT Act focuses more narrowly on ethics rules for senior government officials rather than the structure of the market itself.

Even with several bills on the table, passage is not simple. President Trump and his family have financial ties to the prediction market industry. Donald Trump Jr. has advisory ties to Kalshi and Polymarket, and Truth Social has partnered with Crypto.com on prediction markets.

The CFTC’s Role in Prediction Market Legality

The CFTC has played a central role in the prediction market fight. Under Chairman Michael Selig, the agency has taken a much more active position than many observers expected.

In February 2026, the CFTC withdrew the Biden-era event-contract proposal that would have restricted certain prediction markets, including political markets. In March 2026, the agency published an Advance Notice of Proposed Rulemaking, asking for public comment on how event-contract derivatives traded on prediction markets should be regulated.

The agency has also stepped directly into the state-level fight. In April 2026, the CFTC sued Arizona, Connecticut and Illinois to block state enforcement against CFTC-regulated prediction markets. It later moved for a preliminary injunction and temporary restraining order against Arizona’s criminal and civil enforcement actions, saying the state was trying to apply preempted state law to federally regulated markets.

The CFTC also sued Wisconsin as part of the broader fight over whether states can apply gambling laws to federally regulated event-contract platforms.

The CFTC later sued Minnesota after the state passed the first broad state law banning prediction markets. The agency asked for a preliminary injunction to stop the law from taking effect on August 1, 2026, arguing that Minnesota was trying to criminalize trading in markets that fall under federal oversight.

The CFTC has taken a broad view of its own authority. Its position is that event contracts traded on federally licensed Designated Contract Markets fall under federal oversight, and that states can’t regulate those contracts as gambling products.

The agency has also shown interest in shaping the market from inside the industry. In February 2026, the CFTC announced a 35-member Innovation Advisory Committee that includes the CEOs of both Kalshi and Polymarket.

Taken together, the message is pretty clear. The CFTC is not treating prediction markets like a side issue. The agency is acting like the main federal referee in the fight over who gets to regulate them.

Where the Legal Fight Could Go Next

The legal fight is moving toward a point where the Supreme Court could eventually step in. A big reason is the growing split between federal courts. The Third Circuit sided with Kalshi in the New Jersey case, while the Ninth Circuit has looked more open to Nevada’s position.

If federal appeals courts end up taking different views on the same core question, Supreme Court review becomes much more likely. The core question is whether states can apply gambling laws to sports event contracts traded on federally regulated exchanges.

One case hanging over the background is Murphy v. NCAA from 2018. That decision struck down the federal ban on state authorization of sports betting. Prediction-market operators argue the Commodity Exchange Act works differently from PASPA because the CEA regulates federally supervised financial instruments rather than telling states what laws they can or can’t pass.

So the next phase is starting to come into view. If more circuits split on preemption, the issue may stop being a state-by-state fight and turn into a Supreme Court question about the line between federal commodities law and state gambling law.

Prediction Markets State Availability FAQ

Do I need a state gambling license to use prediction markets?
No. State enforcement has gone after platforms, not individual users. Cease-and-desist orders, lawsuits, fines, and criminal cases have all been aimed at operators rather than traders.

Why are states going after prediction markets if the CFTC allows them?
States argue that sports event contracts work too much like sports bets to sit outside state gambling law. In their view, the platforms should follow the same licensing, tax, and consumer-protection rules that apply to sportsbooks. Whether federal CFTC oversight blocks state enforcement is the main legal question now moving through the courts.

Are non-sports prediction markets part of the same fight?
Not in most cases. State pushback has focused mainly on sports event contracts. Political markets, economic data markets, and other non-sports contracts have faced much less pressure. That said, states such as Hawaii, Minnesota, Nevada and Wisconsin have taken or proposed broader actions that may reach beyond sports.

Is Polymarket legal in the U.S.?
Polymarket returned to the U.S. market in late 2025 after acquiring QCEX, a CFTC-licensed derivatives exchange and clearinghouse, and clearing key regulatory hurdles. The international version of Polymarket has historically been unavailable to U.S. users, while Polymarket US / QCEX gives the company a regulated U.S. path. Like Kalshi, Polymarket US is now facing state-level pressure in some markets.

What is the biggest legal win for states so far?
Massachusetts gave states one of their strongest early wins when a court issued a preliminary injunction in January 2026 blocking Kalshi’s sports contracts. Minnesota also passed the first broad state ban on prediction markets, although the CFTC is already suing to block it.

What is the biggest legal win for prediction markets so far?
The biggest win so far is the Third Circuit’s 2-1 ruling in April 2026 in Kalshi’s favor in New Jersey. The court held that sports event contracts qualify as swaps under federal law and fall under the CFTC’s exclusive jurisdiction.

Could Congress shut down prediction markets?
Congress could change the Commodity Exchange Act and remove sports event contracts from CFTC jurisdiction. Several bills introduced in 2026 were aimed at doing exactly that. None had passed as of May 2026.

Do I have to pay taxes on prediction market trading winnings?
Yes. In the U.S., prediction market winnings or profits are generally taxable, even if the platform doesn’t send a tax form for every trade. Tax treatment can depend on the product and your specific activity, but the IRS says gambling winnings are fully taxable and must be reported. The main question is whether you had taxable winnings during the year, not just whether you received a 1099.