The prediction market industry is currently navigating a series of legal disputes with state gaming regulators, facing significant hurdles even as some advocates emerge to support its cause.
By Jesse Hamilton|Edited by Nikhilesh De Jul 5, 2026, 1:00 p.m. 3 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on Prediction market platform Kalshi may ultimately present its case to the U.S. Supreme Court. (Jesse Hamilton/CoinDesk)SummaryShow- Kalshi, the leading prediction market platform, is embroiled in numerous legal disputes across various states as it argues that state regulators lack authority over its operations.
- The company is facing challenges in Nevada and Michigan, while actively pursuing legal arguments in Minnesota, with a potential escalation to the U.S. Supreme Court.
- North Carolina is reportedly nearing the implementation of a state tax on prediction market earnings.
Kalshi is heavily invested in its legal battles, as the firm seeks to clarify whether its activities fall under gambling or if they are classified as derivatives trading.
This prominent U.S. prediction market company, along with the expanding event-contract sector, aims to reshape the landscape of sports betting, akin to how ride-sharing disrupted traditional taxi services. However, it requires definitive judicial rulings to solidify its legal status. Support from the federal derivatives regulator may provide an advantage, but the firm is currently at odds with several states, including a recent court case in Minnesota.
During recent oral arguments in Minnesota, attorneys for the industry sought to challenge the state's move to ban prediction markets as illegal activities, while other legal matters are also unfolding.
In Nevada, the state Supreme Court recently rejected Kalshi's request to prevent a requirement that would limit its customers' trading options in the state. The ruling, issued by three justices, indicated they were "not persuaded" by Kalshi's emergency motion, and the company could face further legal repercussions for not complying with a court-imposed geofencing deadline.
In Ohio, Kalshi has filed a lawsuit against the gaming regulator, seeking to overturn a $5 million penalty imposed on allegations of operating an unlicensed sports betting business, following similar actions from the Commodity Futures Trading Commission.
The following day, a Michigan court issued a temporary restraining order against Kalshi, prohibiting the company from offering or promoting sports betting within the state for two weeks.
Henry Williams, Executive Director of the Michigan Gaming Control Board, stated, "Kalshi is targeting Michigan's most vulnerable residents with sports betting disguised as investing — and without intervention, the harm will keep escalating.”
On a more favorable note, the CFTC, led by its innovation-focused chairman Mike Selig, is advocating that Kalshi and similar platforms should be governed solely by the agency as the U.S. derivatives regulator. The CFTC argues that the contracts in these prediction markets are akin to those utilized by agricultural businesses for hedging against fluctuations in crop prices.
Jacki McGavick commented, "While states waste taxpayer money to protect casino and sportsbook monopolies, Kalshi is fighting for consumers' rights to a fairer and more transparent market. We will continue to defend Americans' access wherever it is challenged."
In addition to the jurisdictional disputes, some states are recognizing the potential tax revenue from the surging popularity of prediction markets. North Carolina's legislature is set to finalize a budget bill imposing a 6% tax on revenues from prediction markets while simultaneously increasing taxes on sportsbook gaming, thereby distinguishing between the two betting methods.
New Jersey is also pursuing new tax frameworks for prediction markets. The state attempted to classify these firms similarly to sports betting operations; however, Kalshi successfully obtained a legal pause from a federal court, which acknowledged that the CFTC likely has jurisdiction. This matter is advancing toward the U.S. Supreme Court, with New Jersey recently requesting an extension for its appeal process.
New Jersey Solicitor General Jeremy Feigenbaum emphasized the significance of this issue, stating, "The Third Circuit's determination — that sports bets fall under the exclusive jurisdiction of the Commodity Exchange Act and that this Act supersedes state regulation of sports betting — could lead to federalizing a multibillion-dollar sports wagering industry at the expense of state laws nationwide."
The Supreme Court has granted an extension until August 4, 2026, according to the court's docket.
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