States Sue Prediction Markets Over Unregulated Gambling Claims

Prediction market platforms Kalshi and Polymarket are facing a nationwide legal battle as over 30 U.S. states, including Louisiana, file court cases alleging the platforms operate as unregulated gambling companies. The platforms, which have combined valuations approaching $40 billion and monthly volumes of $13 billion, allow users to wager on elections, wars, and corporate earnings. State officials, including Louisiana Attorney General Liz Murrill, argue these services bypass state gaming laws, evade taxation, and lack safeguards for underage users and addicts.

In response, the platforms contend they trade financial derivatives and futures, placing them under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state laws. While the Biden administration previously planned to regulate such wagering, the Trump administration canceled those initiatives. The CFTC, led by Chairman Michael S. Selig, now supports the industry's growth and opposes state-level prohibitions.

Further complicating the regulatory environment are ties to the current administration, as Donald Trump Jr. serves as an advisor and investor in both Kalshi and Polymarket. Additionally, Truth Social has announced plans to launch its own prediction market. Despite the growing number of state lawsuits, federal intervention to restrict the platforms appears unlikely given the prevailing support from the CFTC and the executive branch.