Utah Moves to Block Prediction Markets, Putting Kalshi and Polymarket at Risk Under Gambling Laws

Kalshi and Polymarket offer sports predictions through event contracts regulated by the US Commodity Futures Trading Commission, creating a regulatory disparity with traditional gaming operators that must obtain licenses and pay taxes in each state. Sports have become a core growth driver for the platforms, meaning their potential inclusion in the CLARITY Act could affect federal, state and tribal jurisdiction as well as a major source of platform revenue.

On June 16, 2026, more than 60 groups, including the American Gaming Association, the Indian Gaming Association and the Association of Gaming Equipment Manufacturers, sent a letter to the Senate seeking an explicit ban on sports and casino-style contracts. Kalshi recorded $16.81 billion in trading volume in May, compared with $7.08 billion for Polymarket. The bill’s next step is a vote by the full Senate.

Kalshi and Polymarket allow users to trade contracts tied to game outcomes, point spreads and player statistics. The dispute centers on whether these products are derivatives subject exclusively to oversight by the U.S. Commodity Futures Trading Commission, or must also comply with state gambling laws. Kentucky separately enacted legislation in April 2026 imposing a 14.25% tax on platform trading fees, above the 9.75% rate on racetrack wagers.

On June 17, 2026, Kentucky Attorney General Russell Coleman sued Kalshi, Polymarket and their partners Coinbase, Robinhood and Webull in Franklin Circuit Court, alleging that they offered sports betting without licenses and failed to provide support for problem gambling. The state described the two platforms as multibillion-dollar businesses. The case puts the Trump administration, which supports exclusive federal oversight, in direct conflict with a Republican-led state government.

Kalshi and Polymarket allow users to wager on political, military and sporting outcomes through event contracts. Such products are regulated by the U.S. Commodity Futures Trading Commission, but have raised fairness concerns because people with access to confidential information could profit from them. In January 2026, a trader made more than $409,000 by betting on political developments in Venezuela.

On March 23, 2026, Kalshi barred candidates from betting on their own elections and prohibited sports insiders from trading related contracts. Polymarket also banned people with confidential information or the ability to influence outcomes from placing bets. On May 22, the U.S. House Committee on Oversight and Government Reform launched an investigation, saying more than 80 Polymarket users were linked to suspicious trades, and ordered both platforms to provide KYC and monitoring data by June 5.

Prediction markets allow users to trade “event contracts” tied to the outcomes of contests. Operators including Kalshi argue that such derivatives fall under the exclusive oversight of the U.S. Commodity Futures Trading Commission (CFTC), but Wisconsin considers them sports betting subject to state law. The case therefore raises questions about the boundary between federal and state regulatory authority.

The Wisconsin Department of Justice sued Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com in Dane County court on April 23, 2026, seeking to halt sales of sports event contracts. The complaint alleged that sports contracts generate about 90% of Kalshi’s fee revenue, equivalent to roughly $1.3 billion on an annualized basis. On April 28, the CFTC countersued the state, asserting exclusive federal jurisdiction.

Kalshi, a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC), allows users to trade event contracts tied to sports, politics and other outcomes. Arizona considers the activity gambling that requires a license. The dispute centers on whether the Commodity Exchange Act’s exclusive federal jurisdiction preempts state gambling laws, with implications for whether prediction markets can operate across state lines nationwide.

Arizona Attorney General Kris Mayes charged KalshiEx LLC and Kalshi Trading LLC on March 17, 2026, with 20 misdemeanor counts. Four involved wagering on the 2026 gubernatorial and secretary of state elections and the 2028 presidential election. The charges specified no damages. U.S. District Judge Michael Liburdi stayed the case on April 10, then granted the CFTC a preliminary injunction on May 5 blocking Arizona from pursuing the prosecution.

Prediction markets such as Kalshi and Polymarket allow users to trade on sports outcomes through CFTC-regulated “event contracts,” potentially bypassing state gambling licenses, age restrictions and consumer-protection rules. Sports have become a major source of trading activity for the platforms. The clash between federal derivatives oversight and state gambling jurisdiction is now central to whether the industry can continue expanding.

On March 23, 2026, Democratic Senator Adam Schiff and Republican Senator John Curtis introduced the Prediction Markets Are Gambling Act, which would prohibit CFTC-registered operators from listing contracts resembling sports bets or casino games. Trading volume in contracts on that month's March Madness champion exceeded $100 million, while Super Bowl-related trading volume surpassed $1 billion in 2026.

Kalshi and Polymarket offer event contracts tied to sports, elections and other outcomes. They argue that the Commodity Exchange Act gives the U.S. Commodity Futures Trading Commission, or CFTC, exclusive jurisdiction over such products, while the Nevada Gaming Control Board considers them unlicensed gambling. The dispute will determine whether states can restrict federally regulated prediction markets and could set a nationwide enforcement precedent.

Nevada regulators issued a cease-and-desist order to Kalshi in March 2025. On March 2 and 3, 2026, federal courts remanded the cases involving Polymarket parent Blockratize and Kalshi to state court. On March 19, the Ninth Circuit Court of Appeals declined to stay enforcement, and the following day a state court issued a 14-day temporary restraining order covering contracts tied to sports, elections and entertainment.