Prediction markets operate under a federal regulatory framework in the US, but the position becomes more complicated when individual states challenge certain event contracts. This guide explains how legal prediction markets work, the role of the CFTC, current state-level disputes, recent court decisions, and the latest regulatory updates shaping their availability across the US.
At the federal level, prediction markets can operate in the US when they are offered through regulated exchanges. The Commodity Futures Trading Commission (CFTC) oversees registered prediction exchanges and the prediction market contracts made available through them. Currently, federally regulated prediction markets can operate across all 50 states under federal law. However, that does not mean every contract is available everywhere.
Several states argue that certain sports-related event contracts also fall within their own state gaming rules. That has created an ongoing dispute over which regulator has the final say: the federal CFTC or individual states. As things stand, the answer depends heavily on:
With this, it is better to think of prediction markets as federally regulated but still subject to significant state-level challenges, particularly where sports prediction markets are concerned.
Prediction markets allow you to buy and sell contracts based on the outcome of a future event. Most follow a simple yes-or-no structure. For example:
You might find:
Those prices broadly reflect what the market thinks about the likelihood of each outcome. If you buy a Yes contract for $0.65 and the event resolves in your favor, the contract typically settles at $1. Your difference would be $0.35 before any applicable fees or taxes are applied. If the event resolves the other way, that contract would settle at $0.
You do not necessarily need to hold a position until the event finishes, either. Many regulated prediction markets allow you to sell an open position beforehand at the latest market price.
The range of available markets has expanded considerably. Current event contracts can cover areas including:
Of these, sports-related contracts have attracted the strongest state challenges, while economic, weather, and financial event contracts generally create fewer state-level conflicts.
The CFTC is the federal agency responsible for overseeing US derivatives markets. A prediction market site offering event-contract derivatives to the public needs to operate as, or through, a regulated entity such as a Designated Contract Market (DCM).
Registered exchanges must meet requirements covering areas such as:
The exchange also has responsibility for monitoring unusual activity and enforcing its own market rules. That said, CFTC registration does not mean every contract receives individual approval. A registered exchange can self-certify certain new contracts by submitting them to the CFTC and stating that they comply with federal requirements.
So, when you see that an exchange is CFTC-regulated, that tells you something important about the exchange itself. It does not necessarily mean the Commission has separately approved the merits of every event market you see on the platform.
Federal regulation also brings several useful protections. As established, registered exchanges must monitor trading activity, maintain market rules, and take steps designed to limit fraud, manipulation, and misuse of inside information. The CFTC also states that customers should receive clear information covering:
You can also submit complaints through the exchange, the National Futures Association, or directly to the CFTC. The agency additionally recommends confirming that any website or prediction market application genuinely belongs to a registered entity before transferring funds or taking positions.
Prediction market sites such as Kalshi argue that qualifying event contracts traded on federally regulated DCMs fall within the Commodity Exchange Act and therefore come under the CFTC’s exclusive jurisdiction.
However, several states disagree, claiming that sports event contracts can still fall within state gaming rules, meaning operators may also need to comply with state licensing, age, consumer-protection, and market restrictions.
Courts have now reached different answers to essentially the same question. As things stand, three major federal appeals decisions have created a clear divide.
| Court | State dispute | Current direction |
|---|---|---|
| Third Circuit | New Jersey | Favored federal CFTC preemption |
| Ninth Circuit | Nevada | Favored state regulatory authority |
| Sixth Circuit | Ohio and Tennessee | Favored state regulatory authority |
One of the easiest mistakes to make is assuming that a state dispute blocks an entire prediction exchange. That is not always the case. In fact, most state proceedings focus specifically on sports-event contracts. An exchange may therefore restrict sports markets in a particular state while continuing to offer contracts covering:
That said, just because you can access a prediction market site does not necessarily mean every market on that platform is available to you. Likewise, one category being restricted does not automatically mean the entire exchange has been blocked.
Next, we cover the latest news surrounding the legal situation as it all unfolds. This is the story so far:
The CFTC proposed a more structured approach for reviewing event contracts connected with activities specifically identified in the Commodity Exchange Act. Those areas include war, terrorism, assassination, gaming-related activity, and conduct prohibited under state or federal rules. The proposal would create a 90-day review framework and give the CFTC a defined set of public-interest factors to consider.
The Ninth Circuit ruled that Nevada could enforce its state framework against Kalshi’s sports contracts. That decision represented the first major split with the Third Circuit and significantly strengthened the position of states challenging prediction markets.
New Jersey filed a petition asking the US Supreme Court to review the Third Circuit ruling that favored Kalshi. Kalshi’s response deadline has now been extended to November 9, 2026. With courts now taking different positions on the same question, there is a strong argument for the Supreme Court providing a nationwide answer.
The Sixth Circuit ruled against Kalshi in disputes involving Ohio and Tennessee. The decision upheld an Ohio ruling that refused to block state action and removed the protection Kalshi had previously secured in Tennessee. This was particularly significant because it created a second ruling against Kalshi shortly after the Ninth Circuit decision in Nevada.
The CFTC published a new proposal on October 9 that would bring certain event contracts within the definition of a swap. The proposal covers contracts based on areas including sports, politics, culture, and weather. This matters because the definition of a swap sits at the heart of several state cases. Prediction market sites argue that swaps traded on DCMs fall within the CFTC’s exclusive jurisdiction, while the Sixth Circuit recently concluded that Kalshi had not shown its sports contracts met that definition.
Things are moving far too quickly for us to provide you with a simple list of allowed states. Instead, we plan to focus this section on the areas currently worth watching most closely.
Prediction markets remain federally regulated in the US, but sports-event contracts are now subject to a major dispute between federal oversight and state authority.
The Third Circuit has backed the federal preemption argument, while the Sixth and Ninth Circuits have allowed states to apply their own rules. At the same time, the CFTC is proposing clearer federal treatment for event contracts, including sports and political markets.
New Jersey’s Supreme Court petition could ultimately provide the nationwide answer the industry has been waiting for. For now, check the specific exchange, contract category, state position, and current court orders before taking a position at one of our recommended sites, found within the banners on this page.
Federally regulated prediction sites fall under the watch of the CFTC. The CFTC currently maintains that registered markets can operate nationwide under federal law, although several states dispute how far that federal authority extends to sports-event contracts.
The main disagreement is whether sports-event contracts qualify for exclusive federal treatment under the Commodity Exchange Act or can also be regulated under state rules. Federal appeals courts have now reached conflicting conclusions, which is why the issue surrounding the legality of prediction markets may eventually need to be resolved by the Supreme Court.
That has not yet been decided. New Jersey filed a Supreme Court petition in September 2026 asking the Court to review its dispute with Kalshi. Kalshi currently has until November 9 to respond, after which the Court can decide whether to take the case.
Yes. State action, court rulings, CFTC decisions, or an exchange’s own compliance policies can change which contracts are available from your location. This may affect a particular category, such as sports markets, without necessarily preventing you from accessing the entire prediction exchange.
No. The regulatory position can depend on the type of event contract involved. Sports contracts currently face the greatest level of state scrutiny, while markets covering areas such as economics, weather, politics, and financial events can raise different regulatory considerations.
Loading …
