States Battle Feds over Prediction Markets

Who could have predicted this? Prediction markets have emerged as one of the biggest stories of 2026.

The online platforms and apps, which allow users to bet on anything from who will win the Oscar for best actor to the temperature in Los Angeles tomorrow, have grown from an obsession of the gambling industry press to an obsession of the mainstream media in short order, with countless stories about the disruptive business model coming from major outlets.

One notable example is the story that New York Times journalist Evan Gorelick wrote in late February about a post of his on X that became the subject of a wager on Tweem.

Things could get rockier as legislators and regulators battle over who has authority over this emerging form of wagering that some critics say is just a stalking horse for inserting sports betting into markets where it’s not already legal.

Critics Say Prediction Markets Are Sports Betting by Another Name

Tweem is one of a growing list of prediction markets, the most well-known being Kalshi and Polymarket. They call themselves financial exchanges where customers buy and sell event contracts—predictions on future events.

Some prediction markets are regulated by the Commodity Futures Trading Commission, a once-obscure federal body that has been suddenly thrust into the limelight thanks to the meteoric rise of prediction markets.

Prediction markets, as disruptors often do, have created conflicts on a variety of fronts, raising ethical questions about the appropriateness of betting on wars and fears about insider trading, in which people with direct knowledge about a future event—like what a YouTube star will say on his next video—can leverage that non-public information into easy money.

But the biggest controversy over prediction markets is their contracts for sporting events, which critics argue are indistinguishable from sports betting.

Sports betting is regulated at the state level. Regulation of some prediction markets at the federal level, however, has raised the possibility that they could offer sports-related contracts in lucrative states where sports betting hasn’t been legalized, like California and Florida.

That prospect has roiled the gambling industry, spurring major national sportsbooks like DraftKings and FanDuel to expand into prediction markets while continuing their traditional operations.

State-level gaming regulators have stepped into the fray, with the Nevada Gaming Control Board suing Kalshi to try to prevent it from operating within the Silver State and the New Jersey Division of Gaming Enforcement attempting to enforce a cease-and-desist order against the platform. The latter dispute was featured in a June 2025 ESPN story that declared the legal fight “could shape the future of American sports betting.”

These battles are now spilling over to a statehouse near you.

Dozen States Considering Bills Dealing with Prediction Markets

Lawmakers in at least 13 states have considered bills this year referring specifically to “prediction markets,” according to the LexisNexis State Net legislative tracking system. Indiana has enacted such a measure (HB 1052).

State Lawmakers Attempt to Regulate Prediction Markets

Utah may be the state taking the most aggressive legislative stance towards prediction markets. Its Republican governor, Spencer Cox, just signed HB 243 by Rep. Joseph Elison (R), which expands the state’s already tough laws against gambling.

While the measure does not mention “prediction markets” specifically, it bans proposition or prop bets—where gamblers wager on an individual athlete’s performance in a game—by classifying such bets as gambling in terms broad enough to cover many event-based contracts.

And Cox made it very clear where he stands on the issue of prediction markets, saying in a post on X, formerly known as Twitter, that they “are gambling—pure and simple.”

“They are destroying the lives of families and countless Americans, especially young men,” he wrote. “They have no place in Utah.”

Indiana enacted a bill (HB 1052) targeting prediction markets more directly. The measure, signed into law by Gov. Mike Braun (R) this month, prohibits judges from engaging in prediction market wagers related to judicial proceedings.

As of March 27, there were about 30 other bills referring specifically to prediction markets pending in 12 other states, according to the LexisNexis® State Net® legislative tracking system. They include:

• Hawaii’s HB 2198 by Rep. Scot Matayoshi (D) and others, which would include prediction markets in the state’s definition of gambling;

• Illinois’ HB 5059 by Rep. Edgar González, Jr. (D), which would also ban people under 21 from using prediction markets, and SB 4168 by Sen. Michael Hastings (D), which would require prediction markets operating in the Prairie State to be licensed;

• Kentucky’s HB 904 by Reps. Michael Meredith (R) and Matthew Koch (R), which would prohibit horseracing tracks from contracting with prediction markets;

• New Jersey’s SB 3692 by Sen. Shirley Turner (D), which would require prediction markets operating within the Garden State to obtain a sports betting license;

• New York’s AB 9251, by Assemblymember Clyde Vanel (D), which would ban prediction markets from taking event contracts on sporting events, and AB 9635 by Assemblymember Phil Steck (D), which would restrict state employees from using information they acquired in their jobs to wager on prediction markets;

• Virginia’s HB 271 by Del. Paul Krizek (D) and SB 609 by Sen. Louise Lucas (D), both of which would establish the Virginia Gaming Commission that, among other things, would evaluate the public-policy implications of prediction markets; and

• Vermont’s HB 913 by Rep. Thomas Stevens (D), which would bar prediction markets from offering contracts on sporting events.

Federal Regulators and Industry Push Back against State Efforts

Commodity Futures Trading Commission Chair Mike Selig asserted in a video posted to X that despite an “onslaught of state-led litigation,” his commission had “exclusive jurisdiction” over prediction markets.

“The CFTC has regulated these markets for over two decades,” Selig said. “They provide useful functions for society by allowing everyday Americans to hedge commercial risks, like increases in temperature and energy price spikes. They also serve as an important check on our news media and our information streams.”

He concluded his remarks with the warning: “To those who seek to challenge our authority in this space, let me be clear. We will see you in court.”

Kalshi CEO and co-founder Tarek Mansour has similarly argued that the company’s event contracts are federally regulated financial instruments.

“The CFTC is our regulator,” he said in a recent interview. “If the CFTC tells us to stop, we will absolutely stop. If they don’t, then we won’t.”

The National Conference of State Legislatures, meanwhile, has urged Congress to address unregulated sports betting through prediction markets, saying it wanted “language reaffirming existing law and ensuring that unregulated sports betting and casino‑style gambling cannot operate under the guise of ‘event contracts.’”

And Mississippi Sen. David Blount (D), chairman of the Senate Gaming Committee, said on a recent NCSL webinar that prediction market contracts on athletic events are “clearly a violation of state law.”

This fight is likely to continue for some time and could grow more contentious.

—By SNCJ Correspondent BRIAN JOSEPH

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