Kalshi Teams Up With Former Trump Official to Launch Prediction Markets Lobby Group

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.

Prediction markets allow users to trade contracts tied to the outcomes of real-world events. After Kalshi and Polymarket began offering sports-event contracts in 2025, the industry grew into a billion-dollar market within a year. At the heart of the controversy is that platforms have told courts and regulators their products can be used for investment and hedging while marketing them to consumers as legal betting. The dispute raises questions over the respective authority of the CFTC and local gambling regulators, as well as consumer protection.

On June 3, 2026, nine Democratic members of the US House of Representatives, including Kevin Mullin and Gabe Vasquez, sent a letter asking the Federal Trade Commission (FTC) to investigate misleading advertising and consumer complaints and consider possible enforcement action. They requested a response by June 29. The letter cited a March poll in which 61% of respondents said event contracts were more akin to gambling, while 81% considered wagering on sports prediction markets to be gambling.

Legal sports betting expanded rapidly after the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act in 2018. The market is now worth about $165 billion and spans 39 states and Washington, D.C. Kalshi, Crypto.com and others have entered the sector with event contracts regulated by the Commodity Futures Trading Commission, creating jurisdictional conflicts with state gambling laws and tribal gaming interests.

The U.S. Senate Commerce Committee's consumer protection panel held a roughly two-hour hearing on May 20, 2026, focusing on advertising, addiction and the risk of game manipulation. Chairman Ted Cruz cited NBA and MLB manipulation cases and said the Supreme Court might have to decide the issue. Kalshi had previously pledged $2 million to the National Council on Problem Gambling, while testimony indicated that nearly 50% of its trading during the 2025–26 season came from sports contracts.

Kalshi is a prediction market platform regulated by the U.S. Commodity Futures Trading Commission (CFTC), allowing users to trade contracts based on event outcomes. Its business sits at the jurisdictional boundary between federal commodities law and state gambling laws, while multistate litigation and CFTC compliance disputes will shape the growth prospects of U.S. prediction markets.

As of July 20, 2026, Kalshi had hired Stephanie Cutter, a senior Obama administration aide and Democratic strategist, as a policy adviser to bolster its engagement in Washington and address regulatory challenges. The effective date of her appointment and her advisory fees have not been disclosed.