Seven states, including New York, have been sued by the Commodity Futures Trading Commission, which says oversight of prediction markets such as Kalshi and Polymarket belongs to the federal agency.
New York argues those platforms amount to illegal gambling outside state licensing rules and is already involved in at least four lawsuits over the issue.
The clash intensified after the state Gaming Commission last year ordered Kalshi to stop offering sports-event contracts in New York, prompting the company to sue the state.
Albany is still moving toward tighter controls: Kathy Hochul signed an order last month barring state employees from insider trading on prediction markets, and lawmakers are weighing broader regulation.
A $1 trillion market hangs in the balance. Will states or the federal government win control over the future of betting?
Insiders are making millions betting on secret information. Can regulators police these new platforms before it's too late?
Prediction Markets Under Fire: The 2026 Surge in State Bans and Federal Legal Battles
Overview
As of May 2026, prediction market regulation in the U.S. is marked by a growing conflict between federal and state authorities. The Commodity Futures Trading Commission (CFTC) claims exclusive control over these markets, arguing that event contracts play a valuable role in the financial system and are central to the federal regulatory framework. In response to a wave of state-level crackdowns and new bans, the CFTC has launched aggressive legal actions to defend its authority. This escalating showdown highlights the deep divide over who should regulate prediction markets and sets the stage for ongoing legal and political battles.