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 .
• A U.S. District Court in Arizona has issued a preliminary injunction blocking the state from enforcing its gambling laws against Kalshi, finding field preemption, obstacle preemption, and impossibility preemption all support federal supremacy — the first merits-level ruling on the CFTC's preemption theory, halting 20 misdemeanor charges filed by Arizona AG Kris Mayes .
• The first insider trading enforcement action targeting event contracts is in federal court, with parallel DOJ and CFTC charges against a U.S. Army Special Forces sergeant who used classified intelligence to trade on Polymarket, and simultaneous CFTC disciplinary action against political candidates who wagered on their own campaigns .
• The CFTC under Chairman Michael Selig has shifted from regulatory resistance to market support — withdrawing a 2024 proposed ban, publishing an ANPRM, and litigating aggressively to preserve federal preemption — while simultaneously signaling robust insider trading enforcement .
• For counsel advising prediction market platforms, public companies with employees active on these platforms, or financial services firms, the practical baseline is a two-front exposure: a live jurisdictional war between federal and state authority that is Supreme Court-bound, and an active enforcement posture on insider trading that applies existing anti-fraud frameworks without waiting for new legislation.

Where things stand.

• CFTC preemption litigation is the defining structural conflict, now with a merits ruling. The Arizona district court's preliminary injunction — finding all three preemption theories satisfied — is the first substantive judicial endorsement of the CFTC's position beyond a TRO; similar litigation is pending in New Jersey, Connecticut, Illinois, and New York, with a Ninth Circuit dispute involving Nevada's gaming regulator also active .
• At least 11 states have taken independent enforcement action; 38 state AGs have filed amicus briefs backing state authority. Wisconsin, New York, 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 .
• CFTC Enforcement Director David Miller has articulated insider trading in prediction markets as a priority, ending what the agency characterized as "regulation by enforcement" while simultaneously signaling that anti-fraud authority applies fully to event contracts; a SEC-CFTC MOU on coordination is in place .
• 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 now halted by the 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 .

Latest developments.

• U.S. District Court in Arizona issued a preliminary injunction blocking Arizona AG Kris Mayes from enforcing gambling laws against Kalshi, ruling that prediction market contracts qualify as commodity swaps under the CEA and finding field, obstacle, and impossibility preemption — halting 20 misdemeanor charges and establishing the first merits-level preemption ruling in the multi-state litigation .

Active questions and open splits.

• Federal preemption vs. state gambling authority — the core constitutional question. The Arizona preliminary injunction is the first merits ruling endorsing the CFTC's three-theory preemption framework, but 38 state AGs oppose it; the Massachusetts Supreme Judicial Court, a Ninth Circuit panel, and multiple additional federal district courts are now in play simultaneously, and the trajectory is Supreme Court review .
• 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 .
• What "material nonpublic information" means in the prediction market context. The Van Dyke case involves classified government intelligence; the Kalshi candidate cases involve self-knowledge of campaign strategy; the corporate context involves MNPI about company events. Whether courts will apply securities-law MNPI doctrine, commodities fraud doctrine, or some hybrid is unsettled .
• Scope of SEC jurisdiction. The CFTC asserts primary authority, but the SEC-CFTC MOU and the political-intelligence trading investigations suggest the SEC may assert concurrent jurisdiction over prediction market activity tied to securities-relevant events .
• 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 .
• 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.

• Whether the Arizona preliminary injunction is appealed to the Ninth Circuit — and whether the Ninth Circuit's pending Nevada gaming dispute produces a circuit-level ruling on preemption that controls the Arizona appeal.
• Merits rulings in the Wisconsin and New York federal district court cases — the next substantive judicial assessments of the CFTC's preemption theory beyond the Arizona preliminary injunction.
• The Massachusetts Supreme Judicial Court's decision in Commonwealth v. KalshiEx LLC, which will be the highest-court ruling on the state-law side of the split.
• Whether the Van Dyke criminal case produces a guilty plea or trial — and what statutory theories DOJ advances, which will define the insider trading framework for event contracts going forward.
• 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.
• Whether additional states beyond the current five file enforcement actions, or whether the Arizona preliminary injunction chills further state prosecution pending appellate resolution.