Prediction Markets Regulation

State of play.

• The CFTC has filed suit against at least five states — Arizona, Connecticut, Illinois, New York, and Wisconsin — asserting exclusive federal jurisdiction over prediction markets under the Commodity Exchange Act and blocking state gambling enforcement against platforms like Kalshi and Polymarket .
• New York has filed a direct enforcement suit against Kalshi after a federal court denied Kalshi's bid to block state gambling enforcement and settlement talks collapsed — seeking an injunction, forfeiture, restitution, and civil penalties .
• Washington State has obtained a preliminary injunction against Kalshi, with King County Superior Court finding that event contracts meet the state's legal definition of gambling and that Kalshi's "prediction market" framing does not distinguish it from an unlicensed bookmaker .
• The CFTC's preemption theory has its first merits-level judicial endorsement — an Arizona district court preliminary injunction finding field, obstacle, and impossibility preemption — but state courts in Washington and New York are simultaneously issuing rulings that go the other way, deepening the split .
• For counsel advising prediction market platforms, financial services firms, or public companies with employees active on these platforms, the practical baseline is a hardening multi-state enforcement environment: two state courts have now ruled against Kalshi on the merits, the federal preemption question remains unresolved at the appellate level, and insider trading exposure applies to event contracts without waiting for new legislation.

Where things stand.

• CFTC preemption litigation is the defining structural conflict, now with rulings on both sides. The Arizona district court's preliminary injunction endorses the CFTC's three-theory preemption framework; Washington State's preliminary injunction and the New York federal court's denial of Kalshi's preemption motion cut the other way — creating an active judicial split that is tracking toward appellate and likely Supreme Court resolution .
• At least 11 states have taken independent enforcement action; 38 state AGs have filed amicus briefs backing state authority. Washington, New York, Wisconsin, Arizona, Connecticut, and Illinois are the most active enforcement jurisdictions; the state position is that event contracts are gambling subject to consumer protections including age minimums .
• The CFTC's ANPRM is the formal rulemaking vehicle. Published in the Federal Register on March 16, 2026, the Advance Notice of Proposed Rulemaking invites comment on a framework for prediction markets — the first affirmative regulatory posture from the agency .
• Arizona filed the first criminal charges against a prediction market platform (Kalshi), establishing that state-level criminal exposure is a live risk for platforms operating in non-preempted jurisdictions — those charges are currently halted by the Arizona preliminary injunction .
• Public company compliance programs are not yet calibrated for prediction market risk. The MNPI exposure extends beyond securities trading to corporate event contracts — product launches, leadership changes, M&A — and existing insider trading policies typically do not address this vector .
• Congressional insider trading concerns are active. Democratic senators have demanded SEC and DoD investigations into well-timed bets anticipating Trump policy announcements, adding a political-intelligence dimension to the enforcement landscape .
• The Senate has unanimously banned senators and staff from trading on prediction markets, signaling bipartisan appetite for restricting congressional participation even as the broader platform regulatory framework remains unresolved .
• Competing federal legislation is pending. The Prediction Markets Security and Integrity Act (S. 4060) and the STOP Corrupt Bets Act (S. 4226) represent divergent congressional approaches — one toward regulated expansion, one toward restriction .
• Defamation and accuracy liability for documentary depictions of prediction market activity is now in play. Kalshi's cease-and-desist against Netflix over the "Instadocs: The Prediction Games" trailer — alleging fabricated depiction of a trade placed in a jurisdiction where a court order barred it — raises distinct liability questions for nonfiction producers depicting regulated trading activity .

Latest developments.

• New York AG Letitia James and Governor Hochul sued Kalshi following collapse of settlement talks and a federal court ruling that the Commodity Exchange Act does not preempt New York's gambling laws as applied to sports-event contracts — seeking injunction, forfeiture, restitution, and civil penalties .
• King County Superior Court issued a preliminary injunction against Kalshi, finding event contracts covering sports, elections, disease outbreaks, and natural disasters meet Washington's definition of gambling and that Kalshi's "prediction market" characterization does not carry legal weight under state law .
• Kalshi sent a cease-and-desist to Netflix over a trailer scene for the documentary "Instadocs: The Prediction Games," alleging the trailer falsely depicted a $5,000 Spain World Cup bet placed on Kalshi's platform in Nevada during a period when a court order barred such trading there .

Active questions and open splits.

• Federal preemption vs. state gambling authority — the core constitutional question. The Arizona preliminary injunction endorses the CFTC's three-theory preemption framework; the New York federal court and Washington state court have ruled against Kalshi on the same question — the split is now concrete and multi-jurisdictional, with the Massachusetts Supreme Judicial Court, Ninth Circuit, and additional federal district courts simultaneously in play .
• Whether state consumer protections survive CFTC preemption. If the CFTC prevails, age verification requirements and other state-law consumer protections may be displaced — a politically salient consequence that could reshape the congressional calculus .
• Whether the "prediction market" / "commodity swap" framing carries legal weight. Washington's court explicitly rejected Kalshi's characterization; the New York court similarly declined to treat CFTC registration as dispositive — raising the question of whether the label survives scrutiny in any state court applying a functional gambling analysis .
• What "material nonpublic information" means in the prediction market context. The corporate MNPI exposure extends to product launches, leadership changes, and M&A; the political-intelligence trading investigations add a government-information dimension; no court has yet defined the applicable standard for event contracts .
• Public company MNPI policy gap. Whether existing insider trading policies — drafted for securities trading — adequately cover employee activity on prediction markets tied to corporate events is unresolved; no regulatory safe harbor exists .
• Defamation exposure for depicting restricted trading activity. The Kalshi-Netflix dispute raises whether depicting a trade placed in violation of a court order — even in a documentary trailer — creates independent liability separate from the underlying film, and whether the subject's participation in the documentary affects the analysis .
• Congressional direction: expansion or restriction? The Prediction Markets Security and Integrity Act and the STOP Corrupt Bets Act point in opposite directions; the Senate's unanimous self-ban does not resolve which framework Congress will ultimately adopt for the platforms themselves .

What to watch.

• Appellate proceedings in Washington State following the King County preliminary injunction — and whether the Washington Court of Appeals or Supreme Court addresses the preemption question the state court declined to resolve in Kalshi's favor.
• Whether the New York enforcement suit produces a merits ruling on CEA preemption that conflicts directly with the Arizona district court's preliminary injunction, accelerating the circuit split toward Supreme Court review.
• The Massachusetts Supreme Judicial Court's decision in Commonwealth v. KalshiEx LLC — the highest-court ruling on the state-law side of the split.
• Whether additional state AGs follow New York's direct enforcement model now that a federal court has declined to block state gambling enforcement in that jurisdiction.
• CFTC ANPRM comment period outcome and whether a Notice of Proposed Rulemaking follows — the rulemaking record will be the evidentiary foundation for any preemption defense going forward.
• Netflix's response to Kalshi's cease-and-desist and whether the dispute produces litigation that tests liability for documentary depictions of regulated trading activity.