Are prediction markets legal in the US? How the state fight stands
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Federal regulators say exchanges they register can list event contracts nationwide, many states say sports contracts are unlicensed gambling, & the appeals courts have split.
The short answer
There is no single answer. A prediction market is a platform where people buy & sell contracts tied to the outcome of real-world events. Whether one is legal in the US depends on the state you are in & the type of contract, & the courts had not settled the question by September 2026.
The Commodity Futures Trading Commission (CFTC), the federal regulator of futures & derivatives, says it has exclusive authority over event contracts listed on exchanges it registers. Many states say a contract on a sports result is a sports bet that needs a state gambling licence.
Federal appeals courts have disagreed. The Third Circuit ruled against New Jersey in a case brought by Kalshi on 6 April 2026. The Ninth Circuit sided with Nevada against Kalshi on 28 August 2026.
The federal case
The CFTC’s complaints seek declaratory & injunctive relief: court declarations that the state actions are unlawful, & orders stopping them.
The CFTC says it has “clear & longstanding exclusive jurisdiction” to regulate event contracts under the Commodity Exchange Act. Chairman Michael S. Selig said that “Congress specifically rejected such a fragmented patchwork of state regulations because it resulted in poorer consumer protection & increased risk of fraud & manipulation.”
The agency traces its role to 1992, when it first officially recognised event contracts by allowing the Iowa Electronic Markets at the University of Iowa. It says that after the 2008 financial crisis, Congress gave it comprehensive authority over contracts based on a commodity, a term the statute defines broadly.
The federal government has also sued New York & Minnesota over their actions, FOX 9 reported. New Jersey’s Supreme Court petition also lists cases brought by the United States against Kentucky, New Mexico & Wisconsin.
The states’ case
States argue that sports event contracts are bets & that operators need a state licence. On 18 September 2026, Missouri Attorney General Catherine L. Hanaway ordered Kalshi, Polymarket, Novig, Crypto.com, Underdog & Robinhood to cease & desist from offering sports contracts to Missourians, Covers reported. Her office wrote that “Companies cannot repackage sports bets as ‘event contracts’ to evade Missouri law.”
Hanaway said the six companies are not licensed by the Missouri Gaming Commission & that legal action could follow if no agreement is reached. Covers also reports that Arizona became the first state to file criminal charges against Kalshi over event contracts.
New York has filed several suits. Its attorney general & governor sued Kalshi in July 2026, & the attorney general sued Coinbase & Gemini in April 2026. Both actions were described as cases against illegal gambling platforms.
In a later announcement, Attorney General Letitia James & Governor Kathy Hochul sued QCX LLC, trading as Polymarket US. They allege it runs an illegal, unlicensed gambling operation. They seek an order stopping it, forfeiture of gains, restitution to users & fines equal to three times its gains.
According to FOX 9, Minnesota Governor Tim Walz signed SF 3432, which makes it a felony to operate or advertise prediction market services in the state from 1 August 2026.
Kalshi sued in federal court. It argues the law violates the Supremacy Clause, the constitutional rule that valid federal law overrides conflicting state law, & also its First Amendment rights. Minnesota Attorney General Keith Ellison said prediction markets “are designed to be addictive & prey especially on young people & low-income folks.”
The circuit split
A circuit split arises when federal appeals courts covering different regions reach conflicting rulings on the same legal question. AP reported that the Ninth Circuit’s August 2026 decision raises the likelihood that the Supreme Court will eventually settle whether states can regulate prediction markets under their gambling laws.
According to Associated Press reporting carried by KOLO, the Third Circuit ruled earlier this year that New Jersey could not regulate Kalshi. New Jersey’s Supreme Court petition identifies the case as KalshiEX v. Flaherty (No. 25-1922) & dates the Third Circuit decision 6 April 2026.
On 28 August 2026, a Ninth Circuit panel refused to let Kalshi restart sports & election trading in Nevada while the case continues. The panel said Kalshi had not made a persuasive argument that federal commodities law pre-empts Nevada’s gambling law. It found that federal law likely does not stop Nevada applying its gambling rules to Kalshi’s sports contracts.
The panel sent the election-contract question back to a lower court. Nevada’s attorney general’s office said the court made clear that “sports betting does not become something else simply because a company calls it an ‘event contract'”. Kalshi said it will seek further review.
The Supreme Court question
New Jersey has asked the Supreme Court to hear its case against KalshiEX, LLC through a petition for a writ of certiorari, a formal request for the court to review a lower court’s decision. The petitioners are Mary Jo Flaherty, Interim Director of the New Jersey Division of Gaming Enforcement, & Attorney General Jennifer Davenport.
The question presented is “Whether the 2010 Dodd-Frank Wall Street Reform & Consumer Protection Act preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission.”
The petition gives three reasons to take the case. It says the question has created “A Direct & Acknowledged Split”, that it is “Exceptionally Important”, & that the Third Circuit decision is wrong. It cites the Ninth Circuit’s 28 August 2026 ruling.
State-by-state picture
The list below reflects only what the sources report up to September 2026. It is not a complete map. AP reported that roughly 20 states are involved in litigation, & Covers put the number at more than 20.
Nevada: Kalshi says its sports, entertainment & election contracts are blocked there. The election question is back before a lower court. The petition lists further Nevada cases involving Coinbase, Polymarket, Robinhood & NADEX.
New Jersey: the Third Circuit ruled that the state could not regulate Kalshi, & the state’s petition to the Supreme Court is pending.
Minnesota: FOX 9 reported that a felony ban goes into effect starting 1 August 2026. Kalshi has challenged it, & the federal government has also sued the state.
Missouri: cease-&-desist orders covering sports contracts from six operators were issued on 18 September 2026.
New York: the state has sued Kalshi, Polymarket US, Coinbase & Gemini, & has itself been sued by the federal government.
Arizona, Connecticut & Illinois: each faces a CFTC lawsuit. Arizona has also filed criminal charges against Kalshi, & Covers reports that Connecticut moved against Kalshi’s sports markets in August 2026.
Other states: New Jersey’s petition lists litigation involving Iowa, Kentucky, Maryland, Massachusetts, Michigan, Montana, New Mexico, Ohio, Rhode Island, Tennessee, Utah, Washington & Wisconsin.
Contract type matters.
What it means for users
What a user can trade depends on where they are. In Nevada, Kalshi has said sports, entertainment & election contracts are blocked.
Kalshi argues that CFTC rules forbid it from “discriminating against its customers based on geography”. It says Minnesota’s law forces an “impossible choice” between leaving the state & risking criminal penalties.
Age limits can differ. New York says its law requires mobile sports bettors to be at least 21, & alleges Polymarket US is available to users aged 18 to 20.
Tax is part of the states’ argument. New York says Polymarket US avoids the taxes that licensed casinos & mobile sports platforms pay. It urges residents to check that gambling platforms are registered with the New York State Gaming Commission.
What to watch
The first milestone is whether the Supreme Court agrees to hear New Jersey’s petition. The Nevada case is also still moving, with Kalshi seeking further review & a lower court reconsidering election contracts.
The CFTC has issued an Advance Notice of Proposed Rulemaking, an early step in which an agency asks for public input before drafting rules. The commission says it expects to move forward with regulation.
In Missouri, Hanaway has said a lawsuit could follow if no agreement is reached with the six operators.
Questions
Are prediction markets legal in the US?
It depends on the state & the contract.
Is Kalshi blocked in Nevada?
Kalshi has said trading on sports, entertainment & election contracts is blocked in Nevada. On 28 August 2026 the Ninth Circuit refused to let it restart while the case continues.
What is Minnesota’s prediction market law?
SF 3432 makes it a felony to operate or advertise prediction market services in Minnesota from 1 August 2026, according to FOX 9. Kalshi has sued to challenge it.
What has New Jersey asked the Supreme Court?
New Jersey asks whether the 2010 Dodd-Frank Act pre-empted states from regulating sports bets in their jurisdictions when those bets are offered on CFTC-registered markets.
Which operators did Missouri target?
On 18 September 2026, Missouri’s attorney general ordered Kalshi, Polymarket, Novig, Crypto.com, Underdog & Robinhood to stop offering sports contracts in the state until they are licensed.
Sources
Sources checked 11 October 2026. Information only. 18+.
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