44 States Challenge CFTC Over Sports Prediction Markets

Jonathan Rodriguez

Written by: Jonathan Rodriguez

Published: Fri Jul 31, 2026, 11:00 am ET

Read Time: 4 minutes

44 States Challenge CFTC Over Sports Prediction Markets

industry

44 states have united against the Commodity Futures Trading Commission (CFTC)'s  proposed approach to sports prediction markets. Their bipartisan coalition argues that the federal regulator lacks authority to oversee contracts tied to sporting events.

The states submitted comments opposing the CFTC's proposed rulemaking, claiming it conflicts with existing gambling laws and constitutional principles. Their position adds pressure on the agency as prediction market operators continue expanding nationwide.

The dispute has become one of the largest jurisdictional battles involving prediction markets. It also raises questions about the future of US online sportsbooks and broader USA gambling regulation.

Industry observers expect the outcome to shape how prediction markets, including platforms like Kalshi and Polymarket, operate across the United States. 

Legal experts have also warned that operators should work with state regulators instead of relying solely on federal oversight.

Bipartisan Coalition Argues States Should Retain Gambling Authority

Attorneys general from 44 states urged the CFTC to withdraw and rewrite its proposal governing sports event contracts.

The coalition argues that sports prediction markets resemble gambling products rather than financial derivatives. Therefore, they believe state regulators should remain responsible for overseeing those activities.

In their filing, the attorneys general stated:

"The Proposed Rule goes beyond the CFTC's statutory powers, is in tension with the Constitution, and would otherwise be arbitrary and capricious in its current form," wrote the coalition of states attorneys general, led by Ohio Attorney General Andy Wilson. 

"The CFTC should start afresh with its rulemaking and clarify that sports bets and gambling cannot be traded on [designated contract markets], but are instead subject to state law."

Why Are 44 States Against the CFTC Proposal?

The coalition also outlined several reasons for opposing the proposal.

First, the attorneys general argued Congress never intended the Commodity Exchange Act to regulate sports wagering. They said the law governs commodity derivatives rather than gambling products.

Second, they maintained that the CFTC cannot preempt state gambling laws through rulemaking. Instead, states should continue enforcing their own licensing, taxation, and consumer protection requirements.

Third, the filing emphasized that states have historically regulated gambling within their borders. According to the coalition, that authority includes oversight of sports betting and other wagering activities.

Finally, the attorneys general warned that federally regulated prediction markets could effectively create an unlicensed nationwide sportsbook. They argued such a system would bypass state licensing frameworks while competing directly with regulated operators.

The comments echo concerns raised by tribal gaming organizations, state regulators, lawmakers, and responsible gambling advocates. Many believe the CFTC's proposal exceeds its statutory authority and threatens existing gaming frameworks.

Legal analysts have also cautioned prediction market operators against ignoring state concerns. Instead, they recommend engaging with regulators to reduce litigation risks and improve long-term certainty.

States Continue Legal Fight Against Prediction Markets

The latest filing comes during an active week for litigation involving prediction markets and state governments.

In New York, Attorney General Letitia James recently filed suit against Kalshi and Robinhood. The lawsuit alleges the companies offered unauthorized sports event contracts that violate state gambling laws. State officials argue those products function like sports wagers despite federal oversight.

Wisconsin also remains a key battleground. A federal judge recently denied the CFTC's request for a preliminary injunction that would have stopped Wisconsin Attorney General Josh Kaul from enforcing state gambling laws while litigation continues. 

The decision allows Wisconsin to pursue enforcement as the broader legal dispute unfolds.

Elsewhere, courts continue reviewing similar cases involving Kalshi and state regulators.

Washington secured a preliminary injunction preventing Kalshi from offering sports event contracts in the state. Although the order was temporarily delayed, the court rejected Kalshi's argument that federal law automatically overrides state gambling regulations.

Michigan also extended its temporary restraining order against Kalshi. The court required the company to maintain geofencing measures while litigation proceeds. 

Meanwhile, Nevada continues defending its cease-and-desist order against the platform in federal court.

Federal vs State Regulatory Authority Debate Pushes On

These cases illustrate the widening conflict between federal and state authorities. While the CFTC maintains oversight of designated contract markets, many states insist that sports prediction markets fall within their traditional gambling powers.

As more courts weigh the issue, the outcome could redefine the relationship between federal derivatives regulation and state gambling laws. 

It may also determine whether prediction market platforms can continue expanding without obtaining the same licenses required of US online sportsbooks operating under established USA gambling regulations.

Jonathan Rodriguez
Jonathan Rodriguez

Jonathan is an avid basketball fan, and is often looking forward to the next upcoming NBA season when not checking players' stats during games. He also likes to keep his ears on the ground for the latest rumblings in the online casino industry.

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