States Clash with Prediction Markets Over Sports Betting Laws

Online platforms like Kalshi and Polymarket face legal battles with states over circumventing gambling regulations.

Published on Mar. 8, 2026

Got story updates? Submit your updates here. ›

Online prediction markets are allowing users to wager on a wide range of events, from sports to politics. However, these platforms operate in a legal gray area, sparking conflict between states and the Commodity Futures Trading Commission (CFTC). While the CFTC claims federal jurisdiction, many states view these markets as a backdoor to circumventing established sports gambling regulations, leading to a battle over regulatory authority.

Why it matters

The rise of prediction markets raises concerns about lost tax revenue, consumer protection, and the potential for these platforms to undermine state-level gambling laws. States are particularly concerned about the growth of proposition betting, where users can wager on individual player or team performance.

The details

Eleven states still prohibit sports gambling, and prediction market platforms like Kalshi have been actively targeting these states with advertisements claiming 'sports betting is legal.' This has drawn scrutiny from state regulators, who are worried about lost tax revenue estimated at over $570 million. A bipartisan group of 39 attorneys general are urging a federal court to uphold state authority to regulate sports gambling, putting them in direct conflict with the CFTC's stance of asserting exclusive jurisdiction over prediction markets.

  • In March 2026, the legal battle between states and prediction market platforms escalated.

The players

Kalshi

An online prediction market platform that has been actively targeting states where sports gambling is prohibited.

Polymarket

Another online prediction market platform that operates in a legal gray area.

Commodity Futures Trading Commission (CFTC)

The federal agency that regulates derivatives and claims exclusive jurisdiction over prediction markets.

American Gaming Association

An organization that estimates over $570 million in potential tax losses due to the rise of prediction markets.

Utah

A state that has banned gambling under its constitution and is actively opposing the federal agency and prediction platforms in court.

Got photos? Submit your photos here. ›

What they’re saying

“We must not let individuals continue to damage private property in San Francisco.”

— Robert Jenkins, San Francisco resident (San Francisco Chronicle)

What’s next

The legal battle between states and prediction market platforms is expected to continue, with courts issuing mixed rulings. Congress may be compelled to intervene and establish a national regulatory framework.

The takeaway

The rise of prediction markets has created a complex legal landscape, with states and federal agencies clashing over regulatory authority. This battle highlights the need for clear guidelines to address the risks posed by these platforms, including concerns about lost tax revenue, consumer protection, and the potential for undermining established gambling regulations.