States Restrict Kalshi as CFTC Pushes Prediction-Market Rules

Kalshi operates a designated contract market regulated by the Commodity Futures Trading Commission and argues that its event contracts are federally supervised derivatives rather than wagers subject to state licensing. The dispute tests where financial regulation ends and gambling oversight begins, with major implications for prediction-market operators, state consumer-protection regimes and the CFTC’s claim to exclusive jurisdiction under the Commodity Exchange Act.

On Aug. 28, 2026, a unanimous three-judge panel of the U.S. Court of Appeals for the Ninth Circuit held that Kalshi had not shown the Commodity Exchange Act was likely to preempt Nevada gaming laws. The court affirmed the dissolution of an injunction covering sports-event contracts and sent questions involving election contracts back to the district court. No monetary damages were awarded. The decision conflicts with the Third Circuit’s approach, prompting the CFTC to signal a potential Supreme Court fight.

Kalshi, designated as a contract market by the Commodity Futures Trading Commission in 2020, lets users trade contracts tied to outcomes ranging from sports and elections to economic data. Washington state argues those products amount to unlicensed gambling, while Kalshi says federal derivatives law gives the CFTC exclusive authority. The dispute is important because its outcome could determine whether state gambling rules can constrain a fast-growing industry built around federally regulated event contracts.

King County Superior Court Judge John McHale on Aug. 13 ordered Kalshi to stop accepting new positions in most markets by Aug. 19 and implement geofencing by Sept. 2. Noncompliance could trigger penalties of $120,000 a day. The order allows trading tied to commodities, climate, economics and finance to continue, while restricting categories including sports. Washington Attorney General Nick Brown filed the underlying lawsuit on March 27, accusing Kalshi of violating the state Gambling Act and Consumer Protection Act.

Kalshi operates a CFTC-designated contract market where users trade event contracts tied to sports, politics and other outcomes. The company says those products are derivatives governed by the federal Commodity Exchange Act, while New York treats its sports contracts as unlicensed gambling subject to state safeguards, taxes and age limits. The dispute has become a direct test of whether the Commodity Futures Trading Commission’s asserted exclusive jurisdiction over national derivatives markets preempts state gambling enforcement.

On Aug. 11, 2026, the CFTC invoked emergency authority after KalshiEX notified it of a “market emergency,” ordering the exchange to keep operating in line with the Commodity Exchange Act’s Core Principles. New York Attorney General Letitia James had sued on July 31, seeking a temporary restraining order barring Kalshi from offering all event contracts nationwide and more than $36 billion in damages. The action marked the agency’s first use of such emergency powers since 1980 and sharply escalated the federal-state jurisdictional fight.

The dispute between the Commodity Futures Trading Commission and prediction-market platform Kalshi stems from a Michigan court’s June 29, 2026, finding that Kalshi’s contracts allegedly constituted illegal gambling and its order to cancel completed trades. The case centers on a clash between federal regulatory authority and state law. The CFTC warned that canceling trades would seriously undermine market confidence and contractual certainty.

In the latest development, the CFTC said on July 14, 2026, U.S. Eastern Time that it had invoked emergency powers to stop Kalshi from proceeding with plans to cancel trades by Michigan users, ordering the platform to settle them under normal procedures. Meanwhile, the Michigan court extended its injunction against the platform’s sports-event contracts and ordered Kalshi to implement geofencing to block users in the state by August 12, 2026, or face daily fines.

Kalshi offers event contracts as a designated contract market regulated by the US Commodity Futures Trading Commission (CFTC). The central legal question is whether contracts allowing users to trade on outcomes are federally regulated derivatives or sports betting products subject to state oversight. The rulings will determine whether prediction markets can operate nationwide.

In early July 2026, Kalshi failed to secure a Nevada Supreme Court stay of an order blocking trading in the state, while a Michigan court issued a separate two-week temporary restraining order. The company also sued Ohio regulators and mounted a legal defense in Minnesota. North Carolina’s proposed budget would impose a 6% tax on related revenue, while Kalshi’s deadline to appeal in New Jersey was extended to August 4.

Kalshi is a prediction market regulated by the U.S. Commodity Futures Trading Commission that allows users to trade contracts on event outcomes. The company argues that its products are financial swaps, while Michigan considers its sports contracts to be unlicensed online gambling. The dispute centers on whether federal financial regulation can preempt state gambling laws and also raises questions about consumer protection and gambling tax revenue.

On June 29, 2026, Ingham County Circuit Court Judge Rosemarie Aquilina granted Michigan Attorney General Dana Nessel's request for a 14-day temporary restraining order barring Kalshi from offering or promoting sports contracts to people in the state. The platform must use third-party geolocation technology that complies with state rules to block users. Violations carry a fine of $120,000 per day, and the order was originally set to remain in effect through July 13.

Kalshi is a prediction-market platform regulated by the U.S. Commodity Futures Trading Commission (CFTC) that allows users to trade contracts based on sporting-event outcomes. Illinois has subjected such products to state sports-betting restrictions, sparking a dispute over whether federal derivatives oversight preempts state intervention. The outcome could also affect how prediction markets operate across states.

Kalshi recently sued Illinois officials to challenge a provision in the state's newly enacted budget bill that is scheduled to take effect on July 1. The company argues that restrictions on sporting-event contracts encroach on the CFTC's exclusive regulatory authority. It is seeking to block enforcement, saying the provision would immediately restrict its products and cause irreparable harm that monetary damages could not adequately remedy.

Kalshi is a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC) that offers event contracts tied to outcomes including sports results. The Ohio Casino Control Commission considers such products to be sports betting that requires a license, prompting Kalshi to sue in October 2025. The dispute centers on whether federal derivatives regulation preempts state intervention, and its outcome could also affect platforms such as Polymarket.

On May 12, 2026, the CFTC filed an amicus brief with the U.S. Court of Appeals for the Sixth Circuit supporting Kalshi’s challenge to a federal district court’s March 2026 denial of an injunction. The CFTC called Ohio’s action a “jurisdictional overreach” and asked the court to affirm its exclusive authority over event contracts offered on designated contract markets. The filing marks the agency’s second intervention in a similar case, following its support for Crypto.com in the Ninth Circuit in February.

Kalshi is a designated contract market regulated by the US Commodity Futures Trading Commission, allowing users to trade event contracts tied to outcomes including sports results. Each contract settles at a maximum of $1. New Jersey's Division of Gaming Enforcement classified the activity as unlicensed sports betting, raising the question of whether federal derivatives regulation preempts state law.

On April 6, 2026, the US Court of Appeals for the Third Circuit voted 2–1 to uphold a preliminary injunction issued on April 28, 2025. The court found that sports event contracts are swaps under the Commodity Exchange Act and fall under the CFTC's exclusive jurisdiction. On June 26, the state separately requested an extension until September 4 to file a petition for a writ of certiorari with the Supreme Court.

Kalshi is a prediction-market exchange under the federal oversight of the U.S. Commodity Futures Trading Commission (CFTC), allowing users to trade contracts on the outcomes of political, economic and other events. Its compliance strategy differs from that of crypto-native platform Polymarket, shaping a broader industry debate over whether prediction markets should fall under the federal financial system or be regulated separately by individual states.

The latest data show Kalshi controlling about 89% of the U.S. prediction market, reflecting the lead gained by its regulated trading model. The report did not provide a cutoff date for the data or disclose trading volumes or values. Attention will now turn to the legal and regulatory cases facing Kalshi and Polymarket, as well as the boundary between federal and state jurisdiction.