CFTC vs. State Gaming Boards: Who Actually Wins This Fight

Somebody has to be in charge here, and right now, genuinely, nobody knows who that is.

That's not hyperbole. It's the literal state of American law around prediction markets in the middle of 2026. You've got a federal agency claiming exclusive jurisdiction over an entire product category. You've got dozens of state regulators saying, respectfully, no, this is gambling, and gambling is ours. You've got two federal appeals courts that already looked at essentially the same question and landed on opposite sides. If you trade Kalshi or Polymarket, or you write about them for a living, you need a working mental model of this fight that goes beyond "it's complicated." So let's build one.

The CFTC's Argument, Stripped to Its Core

The Commodity Futures Trading Commission's position rests on one central claim: sports event contracts, election contracts, and similar products traded on federally registered Designated Contract Markets qualify as swaps under the Commodity Exchange Act. And the CEA gives the CFTC exclusive jurisdiction over swaps. Exclusive is the operative word. Not primary. Not preferred. Exclusive, meaning states have no independent authority to regulate the same product through gambling law.

CFTC Chairman Michael Selig has made this argument publicly, repeatedly, and in increasingly pointed language. Responding to Minnesota's felony ban, he said the law "turns lawful operators and participants in prediction markets into felons overnight," and specifically invoked Minnesota farmers who've relied on weather and crop hedging products for decades. That's a deliberate framing choice. The CFTC isn't just defending Kalshi and Polymarket. It's arguing that undermining its jurisdiction over event contracts threatens an entire category of legitimate derivatives trading, agricultural hedging included, that long predates prediction markets as a consumer product.

As of this writing, the CFTC has filed federal lawsuits against at least five states, including Arizona, Wisconsin, New York, Connecticut, and Illinois, each one seeking to override state regulators attempting to restrict federally licensed platforms. It's also filed amicus briefs supporting Kalshi's private litigation in states like Ohio, arguing lower courts have taken "an overly narrow view of the agency's jurisdiction."

The States' Argument, Stripped to Its Core

State regulators aren't arguing the CFTC has zero authority. They're arguing the CFTC's authority over derivatives doesn't automatically erase a state's separate, much older authority to regulate gambling within its own borders. Those are two different regulatory lanes, the argument goes, and Kalshi doesn't get to escape one just by structuring its product to qualify for the other.

The clearest articulation of this came from the 38 state attorneys general who filed an amicus brief supporting Massachusetts's lawsuit against Kalshi. Their brief argued states have "traditionally regulated gambling, including sports betting," and that Kalshi's "aggressive theory of preemption threatens the States' longstanding ability to protect their citizens in this area." That's not a technical argument about swap definitions. It's a federalism argument, states have always had this power, and nothing in a federal derivatives statute clearly and explicitly took it away.

Individual states have layered on their own specific concerns. Minnesota Attorney General Keith Ellison has focused heavily on addiction and predatory design, saying prediction markets "are designed to be addictive and prey especially on young people and low-income folks." Tribal gaming leaders have testified before Congress that unregulated prediction market growth threatens the revenue that funds tribal schools, healthcare, and community services, secured through decades of hard-fought gaming compacts that prediction markets arguably sidestep entirely.

The Scorecard So Far, State by State

Here's where things actually stand, because the abstract legal theory only matters in how it's played out in real courtrooms.

Kalshi has won or is currently winning in: New Jersey, where the Third Circuit affirmed a preliminary injunction in April 2026 in a 2-1 decision, the first federal appellate ruling to squarely address the preemption question and the strongest precedent the industry has. Tennessee, where a federal judge converted a temporary restraining order into a preliminary injunction within weeks. Arizona, where a federal judge halted the state's criminal prosecution pending Ninth Circuit review of related Nevada cases.

States have won or are currently winning in: Massachusetts, where a state court rejected Kalshi's preemption theory outright. Nevada, where an initial win for Kalshi got reversed eight months later by the same judge. Maryland, where a federal judge denied Kalshi's request for injunctive relief, explicitly finding that state gaming authority "can coexist" with CFTC regulation, a very different legal conclusion than the Third Circuit reached in New Jersey. Washington state, where the Ninth Circuit declined to grant Kalshi a stay.

Genuinely unresolved, active litigation: Minnesota, Illinois, Connecticut, Wisconsin, Ohio, Michigan, Iowa, Utah, Montana, and several others, all at different procedural stages, some with hearings scheduled for later in 2026.

That scorecard alone should tell you something. This isn't a fight the CFTC and Kalshi are winning cleanly. It's closer to even than most industry coverage suggests, and the split between the Third Circuit's pro-Kalshi ruling in New Jersey and the Ninth Circuit's rulings favoring Nevada and Washington means the two most important federal appellate decisions so far directly contradict each other.

Why This Almost Certainly Ends Up at the Supreme Court

Circuit splits are, structurally, one of the strongest signals for eventual Supreme Court review. The Third Circuit has ruled that the Commodity Exchange Act both field-preempts and conflict-preempts state gambling law as applied to sports event contracts on a DCM. The Ninth Circuit's refusal to grant stays in the Nevada and Washington cases suggests it isn't persuaded by the same reasoning. When two federal appeals courts look at the same federal statute and reach incompatible conclusions about what it requires, the Supreme Court exists specifically to resolve that kind of disagreement, because otherwise you end up with federal law meaning genuinely different things depending on which coast you're standing on.

There's also a legislative wildcard worth naming. Sens. John Curtis (R-Utah) and Adam Schiff (D-Calif.) introduced the Prediction Markets Are Gambling Act on March 23, 2026, which would amend the Commodity Exchange Act directly to reclassify sports and casino-style event contracts as gambling, explicitly placing them outside CFTC jurisdiction. If that bill, or something like it, actually passes, it would resolve the entire preemption question by statute, bypassing the courts entirely. It hasn't gained the momentum to pass as of this writing, but its existence tells you that even members of Congress see the current ambiguity as untenable long-term.

Five Things This Fight Actually Means for You

If you're trading, or writing about trading, on Kalshi or Polymarket, here's what the CFTC-versus-states fight translates to practically.

1. There is no single, stable answer to "is this legal," and there won't be one for a while. The honest answer to whether Kalshi and Polymarket operate legally depends on which state you're in, which court has most recently ruled on that state's specific case, and whether that ruling is currently under appeal. Anyone giving you a flat yes-or-no answer without those qualifiers is oversimplifying.

2. The CFTC's own rulemaking process is still incomplete, which adds another layer of uncertainty. The agency issued an advance notice of proposed rulemaking on event contracts, with public comments closing April 30, 2026. That process could eventually produce clearer federal rules on which event contracts are permissible, independent of how the court fights resolve. Watch for CFTC rulemaking announcements as a separate, parallel track from the litigation.

3. A circuit split this significant tends to compress timelines, not extend them. Historically, when circuit courts disagree sharply on a nationally important statutory question, Supreme Court review tends to happen faster than the multi-year timelines these individual state cases might suggest on their own. Build your content and trading planning around the possibility of a nationwide resolution within roughly one to three years, not "eventually, someday."

4. Congressional action, if it happens, would move faster than any court process. The Curtis-Schiff bill is a live signal that some lawmakers want to settle this by statute rather than wait for judicial resolution. A single successful piece of legislation could reclassify the entire industry overnight, in either direction, faster than any pending court case could resolve.

5. State-by-state exposure is a real, quantifiable risk factor, not just a compliance footnote. Given the current scorecard, roughly split between platform wins and state wins, a trader or business built around prediction markets carries genuinely different regulatory risk depending on user geography. That's worth factoring into anything from personal trading strategy to how a media business covering this space frames its audience and disclaimers.

Who's Actually Winning

If you need a one-line answer: right now, nobody is, decisively. The CFTC has real wins, most notably New Jersey, and real institutional weight behind its preemption theory. States have real wins too, Massachusetts and Nevada chief among them, and 38 attorneys general standing behind the argument that federal derivatives law was never meant to swallow a state's traditional authority over gambling whole. The genuinely interesting part isn't picking a side. It's recognizing that American regulatory law doesn't have a clean answer to "who regulates a financial product that also functions like a bet," and prediction markets are the vehicle currently forcing courts, Congress, and regulators to actually work that question out in public, in real time, with billions of dollars in weekly trading volume riding on the outcome.