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Prediction markets face legal challenges over US gambling laws
Prediction markets like Kalshi and Polymarket are facing increasing legal scrutiny as courts and state regulators challenge their status as federally regulated financial exchanges. A recent decision by the Sixth Circuit Court of Appeals ruled against Kalshi, stating that its sports-event contracts do not qualify as swaps under the Commodity Exchange Act, thereby allowing states like Ohio and Tennessee to enforce gambling regulations.
Other legal challenges are mounting across the United States. A Washington court granted a preliminary injunction against Kalshi for potential violations of state gambling and consumer protection laws, while a Michigan court rejected an attempt by Coinbase to block state enforcement of sports betting laws against event contracts. Additionally, New York is suing Polymarket, alleging the platform offers sports contracts outside the state's established sportsbook tax framework.
The dispute centers on whether these platforms operate as regulated derivatives exchanges or as unlicensed gambling entities. While prediction markets are increasingly used by institutional investors as sources of continuous probability data for macroeconomic and political forecasting, regulators argue they may bypass state and tribal gaming laws. The outcome of these cases could significantly impact state tax revenues and the regulatory landscape for the intersection of finance and gambling.
Entities
American Gaming Association · Coinbase · Commodity Futures Trading Commission · DraftKings · Kalshi · Polymarket · Sixth Circuit Court of Appeals · United States
Claims
What the coverage asserts, and how many sources carry each claim.
- [○ 1 SOURCE] A federal court in Michigan rejected Coinbase's attempt to block the state from enforcing sports betting laws against event contracts. tgandh.com
- [○ 1 SOURCE] DraftKings reports a 1% customer overlap with Kalshi in states where sports betting is legal. readwrite.com
- [○ 1 SOURCE] Arizona filed criminal charges against Kalshi for allegedly running an illegal gambling business. fortune.com
- [● 2 SOURCES] Approximately 35% of bettors report using traditional sportsbooks less due to prediction markets. cryptobriefing.com · fortune.com
- [○ 1 SOURCE] A Washington court granted a preliminary injunction against Kalshi regarding state gambling and consumer protection laws. tgandh.com
- [○ 1 SOURCE] New York is suing Polymarket over sports contracts offered outside the state's sportsbook tax framework. readwrite.com
- [● 2 SOURCES] Legal sportsbooks saw $166.94 billion wagered in 2025. cryptobriefing.com · fortune.com
- [○ 1 SOURCE] The Sixth Circuit rejected the argument that federal law prevents Ohio and Tennessee from enforcing state gambling laws against Kalshi. www.romanolaw.com
- [○ 1 SOURCE] The Sixth Circuit ruled that Kalshi's sports-event contracts do not qualify as swaps under the Commodity Exchange Act. www.romanolaw.com