These proposals come as state regulators across the country are embroiled in lawsuits over the legality of prediction markets. The regulators argue the platforms offer unlicensed betting, while prediction markets like Kalshi say sports event trades fall under the Commodity Exchange Act (CEA) and are federally regulated by the Commodity Futures Trading Commission (CFTC), which preempts any state laws and regulations.
But multiple sources told iGB they expect such state legislative efforts to be largely ineffective. Dustin Gouker, publisher of the prediction market newsletter Event Horizon, recently wrote, “state legislatures are wasting their time trying to ban and/or regulate prediction markets.”
“Passing a ban doesn’t do anything material,” Gouker told iGB. “The status quo would persist and create another lawsuit. They’re not going to stop or pay taxes and listen to your regulations. They’ll go back to that they’re federally regulated and (say) ‘we don’t care about your laws.’”
While the industry is sour on state-level legislation, Congress has the power to amend the CEA and prohibit sports events and casino-style markets from prediction markets. US Rep Dina Titus of Nevada on Tuesday introduced the Fair Markets and Sports Integrity Act, HB 7477, to amend the CEA.
“Prediction markets should not be able to circumvent state gaming laws,” Titus wrote on social media. “Consumers deserve transparency, accountability and protection against such predatory practices.”
Indian Gaming Association Chairman David Bean called for such a change at the National Congress of American Indians Executive Council meeting this week.
“Tribes and states are distinct sovereigns,” Bean said, per CDC Gaming. “They should be deciding gambling public policy, not foreign companies exploiting loopholes in new technology.”
Is prediction markets preemption argument weak?
One gambling industry attorney said the preemption argument by prediction markets is weak, but also that it has been effective. Another industry source told iGB the state legislative action is unlikely to matter because of the preemption issue and because Kalshi would likely sue, given the platform’s recent history with state regulators.
Perhaps most importantly, prediction markets are likely to receive backup from the CFTC, as new Chair Michael Selig said last month the Trump administration might begin to challenge the states taking on Kalshi. He also said the CFTC will work on new rules for event contracts.
Under the Biden administration, the CFTC worked to prohibit sports and election betting, but the commission did not finalise the rules before the transition. Selig withdrew the proposed rules last week.
Gouker said the state legislative movements will be moot until the Supreme Court rules on the issue. If the Supreme Court rules against the prediction markets preemption argument, then the states laying the groundwork now could benefit.
While Kalshi could take states to court over their laws, multiple sources said other prediction market operators, including Crypto.com and Polymarket, could lose by challenging state laws. Crypto.com and Polymarket are more reliant on money from partnerships with state-regulated gambling operators than Kalshi, which largely attracts its own, sources said.
“Kalshi has nothing to lose by saying f— you to the states,” one source said. “[The others] need their partnerships with regulated gaming entities to feed their liquidity.”
Shutting down prediction markets
Legal sources told iGB there is a strong route to shutting off prediction markets beyond amending the CEA. It starts with following the path Massachusetts initiated last year, as Attorney General Andrea Campbell sued Kalshi for violating the state’s gambling laws.
Last month, Suffolk Superior Court Judge Christopher Barry-Smith granted Campbell’s request for a preliminary injunction against Kalshi. Barry-Smith noted the platform “mirrors other digital gambling experiences” and “borrows gambling terminology”.
Barry-Smith last week denied Kalshi an emergency stay in the case. He ruled that the CEA does not apply to state regulation of gambling.
Courts also have granted injunctions against Kalshi in cases involving Maryland and Nevada. There are multiple other lawsuits involving prediction markets, including those in New Jersey, New York and Ohio, as well as tribal-related lawsuits.
Multiple sources also noted the potential threat that gaming regulators could revoke licences from those operators taking part in event trading. That includes going after payment processors and other vendors crucial to the support of the gambling industry.
Additionally, one source said that during this election year, elected officials should be speaking out against the proliferation of gambling and call for real reform. As part of that strategy, prediction markets would be tied to Trump, forcing Republican candidates to defend the industry.
“But all of that takes a ton of guts and manpower and resources,” the source said.
Prediction market bill details across the US
Last week, the Hawaii House Committee on Consumer Protection and Commerce advanced HB 2198 unanimously. The bill would define prediction markets as illegal gambling. Hawaii is one of two states, along with Utah, with no forms of legal gambling.
Rep Scot Matayoshi introduced the bill after more than $488,000 was traded on prediction market platforms relating to Hawaii Governor Josh Green’s State of the State address. Matayoshi told the Hawaii Tribune Herald he is trying to close a gambling loophole. That discussion comes as a study group looks at potential gambling options in Hawaii.
In Illinois, Rep Edgar Gonzalez introduced a bill to limit what prediction markets can offer. Gonzalez’s HB 5059 would prohibit trading on sports events, ban market makers, require responsible gambling safeguards and impose advertising restrictions. Gonzalez also introduced a bill that would legalise online casinos in Illinois.
Iowa Senator Mike Klimesh filed SF 2085 last month, looking to require prediction markets to secure licences from the Iowa Department of Revenue. It would include a $10 million fee and create a 20% tax on revenues.
In New York, lawmakers proposed a regulatory framework covering prediction markets. Senator Jeremy Cooney’s SB 8889 would require prediction markets operating in New York to obtain a licence from the Department of Financial Services. Last year, the New York State Gaming Commission sent Kalshi a cease-and-desist order and Kalshi responded by suing the state. Similar to Illinois, legislation has also been offered in New York looking to legalise online casinos.
Senator Joe Addabbo, who chairs the Senate Racing, Gaming and Wagering Committee, said Kalshi and other prediction markets are cutting into New York’s sports betting market.
“We have operators paying 51%,” Addabbo told iGB last month. “What if someone like Kalshi is not paying anything and it’s creeping into that?” Addabbo told iGB last month. “How do you address it? Regulate it.”
Dingnews.com 16/02/2026