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State of Play
- More than 30 active lawsuits now challenge prediction markets like Kalshi and Polymarket over whether event contracts are federal commodities or illegal gambling.
- The outcome will directly affect market availability, geofencing, and licensing as key appeals in the 9th and 4th Circuits loom this spring.
Since early 2025, the legal fallout from the prediction market boom has become a national litigation fight. The central dispute is whether event contracts are federally regulated financial instruments under the Commodity Exchange Act (CEA) – giving exclusive jurisdiction to the Commodity Futures Trading Commission (CFTC) – or unlicensed gambling subject to state law.
There are over 30 active cases across federal pre-emption suits, state enforcement, and Indian Gaming Regulatory Act claims, consumer class actions, and even rare Statute of Anne suits seeking to recover losses.
Kalshi’s victory in Washington D.C. over election contracts in 2024 cleared the way for a sports push that prompted cease‑and‑desist orders and mixed preliminary rulings: wins in D.C., New Jersey, and California, but losses in Maryland and Massachusetts.
Polymarket’s path differs: a 2022 CFTC settlement, a 2024 FBI probe, and a 2025 U.S. relaunch after acquiring a CFTC‑licensed exchange.
Sports markets the flashpoint
What this means for bettors and operators is concrete and immediate. If courts endorse CEA pre-emption, platforms could operate nationwide under a single federal framework, easing compliance and preserving access in all 50 states.
If state gambling laws prevail, operators will need individual state licenses or must geofence and block players – a practical headache Kalshi warns it cannot easily implement.
For bettors that translates into uneven availability, shifting promotions, and differing consumer protections depending on your state. Consolidated class actions also raise the prospect of refunds or changed platform practices.
Operators face multi-jurisdictional enforcement, high litigation costs, and potential penalties. The fact that roughly 90% of Kalshi’s volume is sports-related makes sports markets the flashpoint. The CFTC’s recent favorable posture helps platforms, but coordinated state, tribal, and AG opposition keeps regulatory risk elevated.
Upcoming key dates
- 9th Circuit oral arguments: April 16 (Nevada appeals involving Kalshi, Robinhood, and Crypto.com)
- 4th Circuit hearing: May 5–8 (Maryland v. Kalshi)
- Emergency and PI hearings: February–March
- Consolidated class complaint: Due March 24
Eventually, the US Supreme Court could be asked to resolve the issue.
Based on reporting by Steven Petrella for Action.
