Prediction markets are growing fast — but so is the legal and political fight over who has the authority to govern them.
At the center of the dispute is a fundamental jurisdictional question: are prediction market contracts a form of gambling, subject to state gaming laws, or are they financial derivatives, exclusively regulated by the federal Commodity Futures Trading Commission (CFTC)? The answer has enormous consequences for the industry’s future.
Throughout 2025, states began sending cease-and-desist letters to platforms including Kalshi, Robinhood, and Crypto.com, asserting they were offering sports betting without state-issued gambling licenses. Rather than comply, Kalshi and others sued the states, arguing that CFTC oversight preempts state gambling authority. Those legal battles are ongoing, and as of 2026, legal action is pending in 14 states.
The industry has also drawn attention in Congress. In May 2026, Senators Dave McCormick and Kirsten Gillibrand introduced the Prediction Market Act, a bill designed to establish clearer consumer protection standards and ethical guardrails — including rules for public officials trading on markets tied to events they may influence. The bill reflects a broader recognition that the existing CFTC regulatory framework, designed for institutional derivatives traders, was not built with millions of retail participants in mind.
The tension has also fractured the traditional gambling industry. In late 2025, DraftKings and FanDuel resigned from the American Gaming Association (AGA), citing the organization’s opposition to prediction markets — even as both companies had already launched their own prediction market products. Fanatics and bet365 followed, leaving the AGA without a single purely online operator among its members. An AGA survey of remaining members found that 81% of senior gaming executives view sports event contracts as a “very significant” threat to the regulated gaming industry.
The irony is plain: the companies most alarmed by prediction markets are, in many cases, the same ones now competing in the space. Whether federal clarity arrives through the courts, Congress, or the CFTC itself, the regulatory framework that emerges will define what prediction markets are allowed to be — and who gets to profit from them.
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*For informational purposes only. Prediction market regulations are actively evolving. Verify the legal status of any platform before participating.*