CFTC Sues Nine States Over Prediction Market Regulation

A legal conflict has emerged between the United States federal government and multiple state governments over whether prediction markets are financial event contracts or unlicensed casinos. The Commodity Futures Trading Commission (CFTC) argues it is the sole regulator of these platforms and has taken the unprecedented step of suing nine states, all led by Democratic governors. The agency invoked emergency powers to instruct platforms to ignore state court orders to protect its statutory authority.

Opposition to the federal position is widespread, with 20 states engaged in litigation and 44 states signing a letter claiming these platforms evade state sports-betting laws and taxes. While courts in Washington and Nevada have ruled against Kalshi, North Carolina recently passed a budget allowing CFTC-licensed markets to operate under a reduced tax rate.

The dispute is further complicated by financial ties within the Trump administration. Donald Trump Jr. serves as an adviser to Kalshi and holds a stake in Polymarket. He has urged Republican state attorneys general to treat prediction markets as sophisticated financial tools rather than gambling operations.