Prediction markets face legal battles over US regulatory jurisdiction

A significant legal and regulatory conflict is unfolding in the United States over whether sports-based prediction markets should be classified as federally regulated derivatives or state-regulated gambling.

Prediction market operators, including Novig, Kalshi, and Polymarket, argue that their platforms fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) via the Commodity Exchange Act. Novig has recently filed federal lawsuits against officials in Wisconsin, as well as in Massachusetts, New Mexico, New York, and Washington, to preemptively block state-level gambling enforcement.

Conversely, various state regulators and entities—including New York, Connecticut, and several tribal groups in California—are challenging these platforms. In New York, officials have sought substantial penalties, alleging that offerings constitute illegal sports gambling. The outcome of these disputes, which may reach the Supreme Court, will likely determine the future legality and operational scope of sports-related event contracts across the U.S. market.