The CFTC issued February and March advisories and a rulemaking notice, while the states barred employees from using nonpublic information to profit on event contracts.
Scrutiny intensified after a US Army soldier was indicted on 23 April for allegedly making nearly $400,000 trading on classified information tied to a military operation.
Public companies face added risks because staff may hold material nonpublic information relevant to contracts on earnings, mergers, executive exits and share-price moves.
How might public companies and employees adapt insider trading policies as prediction markets blur the line between financial instruments and gambling?
Could the explosive growth and offshore nature of prediction markets lead to new forms of market abuse that current U.S. laws can't address?
With the CFTC and states clashing over jurisdiction, could prediction markets soon face a Supreme Court showdown that reshapes U.S. regulation?
Prediction Markets Under Fire: How Federal Swaps Regulation Threatens State Gambling Revenue
Overview
In April 2026, a key federal court ruling classified Kalshi's sports event contracts as swaps under the Commodity Exchange Act, placing them under federal Commodity Futures Trading Commission oversight and overriding state gambling laws in certain states. This decision allowed Kalshi to keep operating but sparked strong opposition from states, tribal governments, and gambling groups who argue these contracts are unlicensed sports betting needing state regulation. The conflict has led to numerous lawsuits, reduced consumer access due to state bans, and significant state revenue losses. With a circuit split among courts, a Supreme Court decision expected by mid-2027 will likely determine whether federal or state rules govern prediction markets nationwide.