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

Prediction markets let users trade event contracts tied to outcomes ranging from elections to game winners, point spreads and player statistics. Kalshi and Polymarket maintain that their US exchanges fall under the Commodity Futures Trading Commission and that the Commodity Exchange Act preempts state gambling rules. State and local authorities counter that sports contracts are functionally wagers offered without the licensing, taxes, age limits and responsible-gambling safeguards imposed on regulated sportsbooks.

Baltimore’s city government filed suit in Baltimore City Circuit Court on Aug. 13, 2026, naming Kalshi, Polymarket and distribution partners Robinhood, Webull and Coinbase as defendants. The complaint alleges the companies operated unlicensed sports-betting services and deceptively presented wagering products as federally regulated financial trading. Baltimore is seeking an injunction, restitution and disgorgement, plus civil penalties of as much as $1,000 for each violation and each day it continues. The filing did not specify an aggregate damages demand.

Kalshi lets customers trade event contracts tied to sports, elections and other outcomes and operates as a designated contract market overseen by the U.S. Commodity Futures Trading Commission. The dispute turns on whether those contracts are federally regulated derivatives or wagers that states may police under gambling laws. The answer matters beyond one platform: a federal win could preserve a national rulebook, while a state win could force prediction markets to obtain local gaming licenses, pay state taxes and follow consumer-protection rules in every jurisdiction.

New York Governor Kathy Hochul and Attorney General Letitia James sued Kalshi in state Supreme Court in Manhattan on July 31, 2026, accusing it of running an unlicensed gambling operation. The state seeks to halt the business, pay restitution, confiscate all allegedly illegal gains and impose fines equal to three times those gains; no fixed dollar amount was disclosed. The CFTC, which sued New York in federal court on April 24, is pressing emergency relief, arguing the Commodity Exchange Act gives it exclusive jurisdiction and preempts state enforcement against federally registered markets.

Prediction markets let users trade event contracts tied to sports, elections, weather and other outcomes. The core legal dispute is whether those products are gambling subject to state control or derivatives governed by the federal Commodity Exchange Act. Minnesota became the first U.S. state to enact an outright ban, escalating a nationwide jurisdictional fight between state gaming authorities and the Commodity Futures Trading Commission, which says it has exclusive oversight of swaps listed by federally regulated exchanges including Kalshi and Polymarket US.

U.S. District Judge Katherine Menendez on July 27 issued a preliminary injunction blocking Minnesota’s law days before its Aug. 1 effective date. The measure would make operating or assisting a prediction market a felony. Menendez said the CFTC, Kalshi and Polymarket were likely to succeed in showing that the Commodity Exchange Act preempts the statute for many event contracts, while enforcement would cause irreparable harm. The order remains in place until a final ruling on the merits, giving the platforms and federal regulator an interim victory.

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.