US House Weighs Prediction Market Rules as CFTC, States Clash

The rise of prediction-market platforms such as Kalshi and Polymarket has intensified a long-running dispute over whether they fall under U.S. federal or state oversight. States have generally treated such platforms as illegal gambling operations. But as prediction markets gain influence in events including elections, defining the respective jurisdiction of the Commodity Futures Trading Commission (CFTC) and state authorities has become a critical milestone in developing a sound market framework.

North Carolina's newly signed budget imposes a 6% tax on prediction-market platforms' net trading fees from 2027 while exempting them from state licensing requirements. The move makes North Carolina the first U.S. state to effectively recognize CFTC jurisdiction through a light-touch tax regime. It eliminates a cumbersome state application process and establishes a new regulatory model for other states.

Prediction markets allow traders to buy and sell event contracts tied to outcomes such as elections and sporting contests. The U.S. Commodity Futures Trading Commission, citing the Commodity Exchange Act, treats them as derivatives under its exclusive jurisdiction. The dispute centers on states continuing to pursue platforms such as Polymarket and Crypto.com under gambling laws, with federal preemption determining whether operators face uniform nationwide rules or a patchwork of state regulations.

On May 26, 2026, Donald Trump said on Truth Social that preserving the CFTC's exclusive jurisdiction over prediction markets was critical. The same day, a new CFTC rule was submitted to the White House Office of Management and Budget for review. On June 10, the CFTC released a proposal to amend Rule 40.11 and establish a 90-day review process for contracts involving war, terrorist attacks, assassinations and gambling. The proposal is a regulatory rule, and no financial amount was disclosed.

The U.S. Commodity Futures Trading Commission, or CFTC, asserts federal jurisdiction over prediction markets such as Kalshi and Polymarket. The rapid expansion of sports-event contracts has also heightened concerns about insider trading, fraud and manipulation. The NHL signed multiyear partnerships with both platforms on Oct. 22, 2025, granting access to official data and league branding and creating a need for a cross-agency monitoring mechanism.

The CFTC and National Hockey League signed a memorandum of understanding on May 21, 2026, to share confidential information concerning professional hockey and related event contracts. They will also appoint representatives to coordinate regularly. Financial terms were not disclosed. The agreement focuses on the early detection and prevention of insider trading, fraud and other abuses. It is the CFTC's second oversight partnership with a professional sports league after signing an agreement with Major League Baseball on March 19.

Prediction markets allow users to trade event contracts tied to elections, sports and weather. Operators such as Kalshi argue that these products are derivatives regulated by the U.S. Commodity Futures Trading Commission, while states regard them as gambling. Minnesota became the first state to impose an explicit blanket ban, raising the central question of whether the federal Commodity Exchange Act preempts state criminal and gambling laws.

Governor Tim Walz signed SF 4760 on May 18, 2026, banning the creation, operation, facilitation or advertising of prediction markets. Violations are punishable by up to five years in prison and a $10,000 fine, and the law takes effect on August 1. The CFTC sued within hours on May 19, arguing that event contracts fall under exclusive federal jurisdiction and seeking a preliminary injunction to block state enforcement.

Polymarket offers blockchain-based binary event contracts. The CFTC found that it had operated an unregistered derivatives market and, on January 3, 2022, imposed a $1.4 million penalty and ordered it to wind down noncompliant markets. Its main international platform has blocked US users since then. Lifting the ban would allow Polymarket to challenge regulated rival Kalshi in the United States with its full product offering.

Bloomberg reported on April 28 that Polymarket was negotiating with CFTC Chairman Michael Selig to amend the 2022 settlement terms and allow US traders back onto its international platform. The company has spent $112 million to acquire licensed exchange QCEX and launched the regulated Polymarket US in late 2025. It also filed a self-certification with the CFTC for sports parlay contracts on May 20, but reopening the main platform to US users still requires regulatory approval.

The National Football League says outcomes involving player signings, coaching dismissals and game injuries could be influenced by a single person with inside information or decision-making authority. Contracts tied to such events on prediction markets including Kalshi and Polymarket could raise concerns about insider trading and the integrity of the sport, putting them in the regulatory spotlight.

The NFL has written to Kalshi, Polymarket and other platforms asking them to block those easily manipulated betting propositions. Commodity Futures Trading Commission Chairman Michael Selig said the agency would respect the views of sports leagues and consider barring such contracts from being listed. As of July 20, 2026, no formal ban, implementation date or amount involved had been announced.