ThelegaliTyoFPRediCTionmaRkeTs: TheCuRRenTsTaTeoFThelaw
Trial & Litigation Section Chair: JenayE. Iurato – IuratoLawFirm, PL
Predictionmarkets, like kalshiandPolymarket, havefacedlegaland regulatorychallenges fromthestart.
Prediction markets have experienced a meteoric rise in popularity. Platforms like Kalshi and Polymarket allow people to bet on the likelihood of certain events happening in real life. The user receives funds when an option contract correctly predicts an outcome or event. With media outlets and pollsters no longer reasonably predicting real life events, prediction markets have provided individuals with the opportunity to try their hand at forecasting the future and possibly making money on that prediction. These events range from the average daily rainfall accumulations to whether the United States will prove aliens exist. Shares are purchased by an individual on the platform’ s website, with each share representing the likelihood of the predicted event occurring.
Legal Challenges to Prediction Markets:
Prediction markets have faced legal and regulatory challenges from the start. When Kalshi came onto the scene, the Commodity Futures Trading Commission( CFTC) banned it from predicting which political party would control the Senate, alleging that it was“ illegal gaming.” Kalshi filed a federal lawsuit in the District of Columbia arguing that these contracts were not contrary to public interest and, therefore, that the CFTC was overstepping its authority. In 2024, the Court sided with Kalshi, holding that political betting does not constitute gaming. This win paved the way for the legality of prediction markets. As a result, in December2025, Polymarket lifted its ban on customers from the United States to capitalize on the soaring popularity of prediction markets in this country.
The estimated monthly volume in prediction markets in early 2026 is $ 30 million. Despite that, over 70 percent of prediction market users are unprofitable.
Despite the ratification from the Court on its legality, prediction markets continue to face regulatory issues. A key issue being litigated is whether prediction markets are just illegal gambling in disguise. The gray area is particularly problematic in states where sports betting has been deemed illegal. Currently, New Jersey, Massachusetts, New York, Ohio, and Nevada all have existing lawsuits that prediction markets like Kalshi violate state gaming laws.
Further complicating the litigation surrounding prediction markets is the consideration of jurisdiction over these lawsuits. Many states have taken the position that violation of state gaming laws is an issue for state jurisdiction. The CFTC maintains it has exclusive jurisdiction over regulating gaming contracts.
For example, Wisconsin’ s Department of Justice filed a lawsuit against several prediction market platforms, alleging they constitute illegal sports betting. Subsequently, the CFTC sued Wisconsin to assert federal jurisdiction over the dispute citing to their exclusive jurisdiction. The State of Arizona even filed criminal charges against Kalshi for violating state gambling laws. A federal judge subsequently granted a preliminary injunction preventing Arizona’ s lawsuit.
Despite their controversial nature, the popularity of prediction markets continues to climb. Kalshi announced after its recent $ 1 billion funding round that it is valued at $ 22 billion, an indication of its longevity. While it appears prediction markets are here to stay, we can expect regulatory waters to continue to alter the course of their legal landscape. n
Author: Jennifer L. Nairn – Buchanan Ingersoll & Rooney PC
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