Over the past year, several states have launched legal actions against some of the largest players in the booming prediction market industry, such as Kalshi and Polymarket. These cases mostly have to do with state-level gambling regulations, as there is disagreement over whether these laws apply to prediction market platforms.
For example, Nevada’s Gaming Control Board has restricted Kalshi’s ability to offer its operations in the state, as the prediction market platform is not licensed to offer sports betting. Kalshi was also sued by Massachusetts Attorney General Andrea Campbell in September, focusing on the fact that 75% of the platform’s trading volume was on sports betting.
Crypto exchange Coinbase, which also recently launched its own prediction markets offerings, has taken a more proactive approach with the filing of preemptive lawsuits in Illinois, Michigan, and Connecticut. There are at least 20 ongoing lawsuits regarding these contrasting viewpoints between prediction market platforms and states that are worried about the unlicensed sports gambling allegedly enabled by them.
I have some big news to announce… pic.twitter.com/3OBNTaOnIL
— Mike Selig (@ChairmanSelig) February 17, 2026
With these lawsuits providing the backdrop, the Commodities Futures Trading Commission (CFTC), which is the federal regulator associated with the type of futures contracts involved in prediction markets, is now asserting itself as the sole regulator of the prediction markets industry. “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets,” CFTC Chair Mike Selig said in a Wall Street Journal op-ed.
States and supporters of states’ rights in this matter have countered aggressively, viewing the CFTC’s stance as an overreach. Utah Governor Spencer Cox blasted Selig on X, calling prediction markets “gambling—pure and simple” while claiming they destroy families and young lives. The governor has vowed to exhaust state resources in court to block them. Nevada Senator Catherine Cortez Masto argued the CFTC lacks authority over sports gaming, accusing it of trampling states’ rights. Former New Jersey Governor Chris Christie echoed this, saying the agency shows “no respect for states’ rights.” Thirty-eight states have also filed an amicus brief backing Maryland’s suit against Kalshi, emphasizing local oversight to curb unlicensed betting.
Mike, I appreciate you attempting this with a straight face, but I don’t remember the CFTC having authority over the “derivative market” of LeBron James rebounds. These prediction markets you are breathlessly defending are gambling—pure and simple. They are destroying the lives… https://t.co/Ohup2x3D8u
— Governor Cox (@GovCox) February 17, 2026
Notably, many of the top crypto exchanges in the U.S. have pivoted to prediction markets as interest in crypto tokens, which are oftentimes ridiculed as highly manipulated penny stocks, has waned in recent years, at least outside of increased institutional interest in bitcoin. Although the executives at these exchanges often talk about the power of Bitcoin’s decentralization and its long-term value proposition on the one hand, their platforms also push their userbases towards highly speculative trading and outright degenerate gambling in search of increased revenue.
This is part of the greater divide between Bitcoin and the larger crypto industry that has become clearer in recent years, as cypherpunk purists promote non-custodial wallets for holding Bitcoin in cold storage and crypto companies built on top of this technology push users to increasingly centralized and controlled products such as stablecoins and corporate blockchains that offer regulatory arbitrage opportunities to the entities behind them.
These crypto companies also spent heavily on the 2024 election cycle, including support for eventual president Donald Trump. Trump has made crypto regulatory clarity and a reversal of former SEC Chair Gary Gensler’s enforcement actions a key part of his first year in office, in addition to facing a variety of accusations of corruption and profiteering related to his own involvement and affiliation with crypto. Despite all of this, the CLARITY Act, which is intended to extend the regulatory clarity regarding stablecoins found in the GENIUS Act to the rest of the crypto industry, recently faced a major setback after a draft version of the bill was referred to as worse than no bill by Coinbase CEO Brian Armstrong.
Up to this point, courts have tended to side with states over the federal government when it comes to regulatory authority over sports-related prediction market contracts. In Nevada, one judge ruled that the CFTC does not have jurisdiction over sports event contracts in a case involving Crypto.com, and just this week, the Ninth Circuit Court of Appeals upheld a similar ruling involving Kalshi. According to Melinda Roth, who is a visiting associate professor of law at Washington and Lee University School of Law, this issue will likely be considered by the U.S. Supreme Court at some point.
