\n<\/p>\n
State lawmakers and gaming regulators across the US are escalating their fight against prediction markets, arguing that the fast-growing platforms are \u201cbasically gambling but with another name\u201d.<\/p>\n
At least 20 federal lawsuits have been filed nationwide, disputing whether companies such as Kalshi and Polymarket should be treated as federally regulated financial exchanges, as they maintain, or as gambling operations that should be regulated like state-licensed sportsbooks.<\/p>\n
The legal battle comes as the sector surges. More than $1bn was traded on Kalshi alone during Super Bowl Sunday, and Bloomberg reported that Kalshi\u2019s January trading volume reached nearly $10bn, most of it tied to sports. In recent months, established sportsbook operators, including DraftKings, FanDuel and Fanatics, have also launched their own prediction platforms.<\/p>\n
Prediction markets let users trade on the outcome of virtually anything, ranging from sports and elections to award shows, speeches and even what someone might wear. Unlike casinos or traditional sportsbooks, users in effect bet, or \u201ctrade\u201d, against one another rather than against an established \u201chouse\u201d, with platforms collecting transaction fees.<\/p>\n
Because they classify their offerings as \u201cevent derivatives\u201d they fall under federal commodities law and are currently overseen by the US Commodity Futures Trading Commission (CFTC) rather than under state gaming regulators, making them available in all 50 states to users 18 and older. By contrast, licensed sportsbooks can only operate where sports betting has been legalized.<\/p>\n
Since the supreme court lifted the federal sports betting ban in 2018, 39 states and Washington DC have legalized it and licensed operators in those states are taxed and must comply with consumer-protection rules, including age limits (typically 21 and older), responsible gaming mandates and integrity monitoring and audits.<\/p>\n
\u201cIf you\u2019re a sportsbook operator in Nevada, for example, there\u2019s a lot you have to do to comply with regulations here and minimum internal control standards,\u201d Gregory Gemignani, a gaming law lawyer and professor at the University of Nevada, Las Vegas, said. \u201cThe prediction markets have none of that.\u201d<\/p>\n
\u201cWhat\u2019s happened is the lines between gambling and investing have been blurred,\u201d added John Holden, a business law professor at Indiana University who focuses on sports and gaming law. \u201cEventually this is going to come to a head.\u201d<\/p>\n
Resistance from states has intensified as attorneys general, state gaming commissions and tribal regulators move to curb prediction markets. They have issued cease-and-desist letters and filed lawsuits arguing the platforms amount to unlicensed sports wagering that evades state gambling laws and taxes. With cases mounting nationwide, legal scholars say the dispute could ultimately reach the supreme court.<\/p>\n
Under federal law, event contracts involving \u201cgaming\u201d are prohibited. The companies maintain that their offerings are lawful \u201cfutures\u201d traded on regulated financial trading exchanges. A Kalshi spokesperson said the company believes \u201cconsistent, national oversight is better for consumers than a patchwork of inconsistent state laws\u201d.<\/p>\n
In October, New York\u2019s gaming commission ordered Kalshi to stop \u201cillegally operating, advertising, promoting, administering, managing\u201d sports-related contracts. Kalshi sued within days, arguing that CFTC oversight pre-empts state authority, and has filed similar challenges in Maryland, New Jersey, Connecticut and Tennessee.<\/p>\n
Ahead of the Super Bowl, New York\u2019s attorney general, Letitia James, issued a \u201cconsumer alert\u201d warning of the \u201crisks posed by prediction markets\u201d, calling them \u201conline platforms offering bets masquerading as \u2018event contracts\u2019\u201d.<\/p>\n
As the legal battle escalates, the companies have embraced splashy promotions in the state. Kalshi offered New York shoppers $50 toward groceries, while this week, Polymarket announced a five-day \u201cfree grocery store\u201d \u2013 widely seen as a nod to the New York City mayor Zohran Mamdani\u2019s proposal for city-run supermarkets.<\/p>\n
Mamdani responded with a meme: \u201cHeartbreaking: The Worst Person You Know Just Made A Great Point.\u201d<\/p>\n
<\/span>People lined up around the block in New York City\u2019s West Village as Polymarket opened its free grocery store pop-up on 12 February.<\/span> Photograph: Anadolu\/Getty Images<\/p>\n So far, several states have secured courtroom wins. In Massachusetts, the attorney general obtained a preliminary injunction temporarily barring Kalshi from offering sports contracts without a state license. Polymarket then sued the state, arguing that only the CFTC can regulate contract markets.<\/p>\n In November, a federal judge in Nevada blocked Kalshi\u2019s sports offerings in the state. The company is appealing to the ninth circuit. Separately, a Nevada court has also temporarily barred Polymarket from offering event-based betting there.<\/p>\n Both companies insist they are futures exchanges, not gambling operators, and that only the CFTC can regulate contract markets.<\/p>\n \u201cAs other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it is subject to exclusive federal jurisdiction,\u201d a Kalshi spokesperson said. \u201cIt\u2019s very different from what state-regulated sportsbooks and casinos offer their customers. We are confident in our legal arguments.\u201d<\/p>\n On Friday, 23 Democratic US senators wrote to the CFTC asking it to stay out of the state legal battles and to bar gaming contracts and those involving \u201cwar, terrorism, assassination, or other enumerated activities\u201d.<\/p>\n Several legal scholars, including Karl Lockhart, a law professor at DePaul University, said that the mounting litigation may push the issue to the supreme court.<\/p>\n \u201cEventually there\u2019s enough cases going on, the issue is nationwide, there\u2019s going to be differences of opinion between the circuits, which is the ideal set-up for a supreme court decision,\u201d said Lockhart. \u201cIf these cases make it to the supreme court, I don\u2019t know what they\u2019ll do. It\u2019s an interesting case. It doesn\u2019t fit neatly into political bubbles, one way or the other.\u201d<\/p>\n Meanwhile, some state lawmakers are advancing bills targeting these platforms. In Connecticut, the governor has proposed banning participation by those under 21, and legislation has been introduced in Illinois that would prohibit sports-related offerings.<\/p>\n In Hawaii, where gambling remains illegal, legislators are advancing a measure to bar online platforms from offering contracts tied to real-world outcomes.<\/p>\n Scot Matayoshi, the Hawaii state representative who introduced the measure, said the offerings were \u201cbasically gambling but with another name and through a loophole\u201d.<\/p>\n He also raised insider trading concerns, noting that they saw almost half a million dollars in bets for what words the Hawaii governor would say in his state of the state address.<\/p>\n \u201cThere were advanced copies circulated, so people knew exactly what he was going to say and could have placed bets,\u201d he said. \u201cThis particular type of gambling really opens the door for insider trading.\u201d<\/p>\n Polymarket made headlines earlier this year, after bettors reportedly profited by predicting the capture of Venezuela\u2019s president, Nicol\u00e1s Maduro, before Donald Trump\u2019s announcement.<\/p>\n The platforms say they monitor for such risks. Ahead of this year\u2019s Super Bowl, Kalshi said it expanded its surveillance and enforcement efforts to detect and remove accounts engaging in insider trading and market manipulation. Its CEO, Tarek Mansour, said the company conducted more than 200 investigations in the past year, froze accounts and referred cases to law enforcement.<\/p>\n \u201cOur insider trading rules are adapted from the rules on NYSE and Nasdaq: if you have material non-public information on a market, you cannot trade it and if you do, you are committing a financial crime,\u201d Mansour has said. \u201cThis applies to government employees, policymakers, executives, or anyone who holds information that is legally not meant to be public.\u201d<\/p>\n Under the Biden administration, the CFTC pursued actions against prediction market platforms, and sought to bar them from offering election event contracts related to politics and sports.<\/p>\n Since Trump\u2019s return to office, the tone has shifted. The CFTC\u2019s new chair, Michael Selig, has signaled support for the \u201cresponsible development\u201d of event contracts and withdrawn proposals that would have limited political and sports event offerings. He has also directed staff \u201cto move forward with drafting an event contracts rulemaking\u201d and to reassess the commission\u2019s \u201cparticipation in matters currently pending before the federal district and circuit courts\u201d.<\/p>\n And just last week, the CFTC unveiled a new \u201cinnovation advisory committee\u201d composed of the CEOs from companies including prediction markets such as Kalshi and Polymarket, crypto firms such as Coinbase, and major gambling operators including FanDuel.<\/p>\n The committee\u2019s work, the government agency said, \u201cwill help ensure the CFTC\u2019s decisions reflect market realities so the agency can future-proof its markets and develop clear rules of the road for the golden age of American financial markets\u201d.<\/p>\n <\/span>Advertisements by Polymarket predict a victory for Zohran Mamdani in the New York City mayoral election on 4 November 2025.<\/span> Photograph: Olga Fedorova\/AP<\/p>\n Barron\u2019s also reported that, as of last week, there were no enforcement attorneys remaining at the CFTC\u2019s flagship office in Chicago.<\/p>\n The debate around prediction markets has also reached Washington, where lawmakers have the authority to amend the Commodity Exchange Act.<\/p>\n In September, Catherine Cortez Masto, a Democratic senator from Nevada, along with the Republican senator John Curtis and several others, urged the CFTC to \u201cnot override state and tribal law\u201d by \u201callowing sports betting in all 50 states by permitting some companies to categorize their sports betting activities as \u2018event contracts\u2019\u201d.<\/p>\n The New York representative Ritchie Torres has introduced draft legislation designed to curb the risk of insider trading among federal officials and their staff. And earlier this week, the Nevada representative Dina Titus proposed amending the Commodity Exchange Act to bar registered entities from \u201cengaging in transactions involving sporting event or casino-style gaming contracts\u201d.<\/p>\n \u201cPrediction markets should not be able to circumvent state gaming laws,\u201d Titus said.<\/p>\n Sports leagues and gambling industry groups have also urged to the CFTC to impose a regulatory framework for these prediction markets, comparable to those imposed on state-licensed sportsbooks.<\/p>\n The American Gaming Association (AGA), a gambling industry lobby group, and the Indian Gaming Association, recently urged Congress to address what they call \u201cunregulated sports event contracts being offered by prediction markets\u201d, which they argue \u201care indistinguishable from legal sports betting\u201d.<\/p>\n Chris Cylke, the senior vice-president for government relations at the AGA, told the Guardian: \u201cThis is fundamentally about state and tribal sovereignty and their ability to regulate their gambling marketplaces and to just oversee their own jurisdictions.\u201d<\/p>\n Polymarket did not respond to requests for comment. In a statement, the CFTC said that while \u201ccomplex interpretive questions about the classification of certain products may be better left to the courts\u201d, Selig had \u201calways stood by the CFTC\u2019s exclusive authority to regulate the marketplace for those products\u201d.<\/p>\n Beyond the legal fight, problem gambling advocates warn of broader risks. The National Council on Problem Gambling has urged the CFTC to adopt rules that prioritize players\u2019 health, arguing that sports-related event contracts pose similar risks to traditional wagering.<\/p>\n Cole Wogoman, the council\u2019s director of government affairs and league partnerships, said: \u201cThere are great legal minds who are going to debate whether this falls into a definition of legally gambling, but from our point of view, that doesn\u2019t really matter. Folks are interacting and treating this as gambling.\u201d<\/p>\n The council, he said, was focused on trying to \u201cget this space\u201d to have \u201cthe same protections and regulations that you\u2019d see at the state or with tribal gaming\u201d, he said. On Monday, the council called for the platforms to display the national gambling helpline.<\/p>\n A Kalshi spokesperson pointed the Guardian to their newly added responsible trading hub, which it said had \u201cprotections comparable to those that sportsbooks and casinos offer\u201d.<\/p>\n Clinicians are also watching closely. Timothy Fong, an addiction psychiatrist and gambling researcher at UCLA, said more patients were using the platforms, and were often describing themselves as \u201cinvestors\u201d rather than \u201cgamblers\u201d.<\/strong><\/p>\n \u201cIdeally in my world, we would have these products regulated by the people that know how to handle gambling,\u201d he said.<\/p>\n The broader question, Fong said, was: \u201cWhat does it mean to us as a society to speculate and put financial terms on every single human event?<\/p>\n \u201cIt commoditizes everything,\u201d he replied. \u201cAnd when you do that, it dehumanizes things.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" State lawmakers and gaming regulators across the US are escalating their fight against prediction markets, arguing that the fast-growing platforms are \u201cbasically gambling but with another name\u201d. At least 20 federal lawsuits have been filed nationwide, disputing whether companies such as Kalshi and Polymarket should be treated as federally regulated financial exchanges, as they maintain,<\/p>\n","protected":false},"author":1,"featured_media":44674,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[1723,17016,303,584,324,5651,2884,1427,15668],"class_list":{"0":"post-44673","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-backlash","9":"tag-blurred","10":"tag-business","11":"tag-face","12":"tag-legal","13":"tag-lines","14":"tag-markets","15":"tag-prediction","16":"tag-surging"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/44673","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=44673"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/44673\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/44674"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=44673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=44673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=44673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}