Are Sports Prediction Markets Legal In The US?

Last updated: April 28, 2026 | Last verified: April 28, 2026

Yes, prediction markets are legal in the United States at the federal level. The Commodity Futures Trading Commission (CFTC) regulates them as financial exchanges, not gambling outfits. I can tell you from firsthand experience that I’ve been actively trading on Kalshi and Polymarket US from New Jersey for months without any obstacles or issues.

That said, the litigation between multiple states, the CFTC, Kalshi, state attorney generals, and various stakeholders within the fintech and traditional gambling realms, is extensive and rapidly evolving. As of late April 2026, there are more than 20 active lawsuits across at least 14 states. Arizona has filed criminal charges against Kalshi. The CFTC is suing four states. A circuit split is forming across federal appeals courts after the Ninth Circuit heard oral arguments in April, and there’s a strong possibility that the Supreme Court hears a case on the matter before the end of 2027. I’ve been tracking this legal battle closely, and honestly, the landscape changes on a near-weekly basis.

Below is a complete breakdown of who can trade where, what the legal arguments are, and where this is all heading. For broader context on how these platforms work, see our prediction markets explainer. For platform-specific details, check the Kalshi review and Polymarket review.

⚖️ Who can trade where right now

Here’s the practical answer most people are looking for.

The distinction that matters is between states where platforms are actually restricted or soon to be (Nevada, Massachusetts) and states where litigation is active but platforms are still live (everywhere else). The lawsuits in New York, Arizona, Michigan, and a dozen other states are real and could eventually result in restrictions, but as of today, the platforms are operating normally in those states. For the full state-by-state litigation breakdown, see the table below.

⚖️ How prediction markets became legal

The legal foundation rests on a specific chain of federal law. The Commodity Exchange Act of 1974 (CEA), amended by Dodd-Frank in 2010, defines “swaps” as a category of financial derivative under the CFTC’s exclusive jurisdiction. Kalshi applied for and received a Designated Contract Market (DCM) license from the CFTC, which authorizes it to list event contracts. Polymarket acquired a CFTC-licensed exchange to gain similar authorization. Crypto.com operates through its North American Derivatives Exchange (NADEX) license.

The pivotal moment came in late 2024 when a federal court ruled that Kalshi’s election contracts were lawful event contracts, not illegal gambling. The CFTC had initially tried to block those contracts but lost in court and reversed course. Armed with that precedent, Kalshi expanded into sports contracts in early 2025 (following the lead of Crypto.com), which triggered immediate resistance from state gaming regulators who saw it as unlicensed sports betting operating outside their tax and licensing frameworks.

The legal theory is straightforward, even if the politics aren’t: if event contracts are “swaps” traded on a CFTC-regulated exchange, then the CEA’s exclusive jurisdiction clause preempts state gambling laws. That’s the argument Kalshi, Polymarket, and the CFTC itself are making in courtrooms across the country. Whether it holds depends on which court you ask. For deeper background on how the prediction market model works, see our prediction markets explainer and the prediction markets explained guide.

⚖️ State-by-state legal status (April 2026)

The table below tracks every U.S. state’s relationship to prediction markets. The legal environment has been shifting fast enough that I’ve had to update this three times in the past month alone. I’ve separated states into three categories: states with active restrictions, states with active litigation (but platforms still operating), and states with no current legal action.

Nineteen states and the District of Columbia have some form of legal action, cease-and-desist order, or regulatory investigation involving prediction markets. That number was in single digits six months ago.

For another comprehensive, case-by-case tracker with docket numbers and filing dates, Mick Bransfield maintains an excellent litigation tracker that is updated regularly. We continue to monitor as well, and will keep this page updated.

⚖️ The circuit split and the road to the Supreme Court

The core legal question (does the Commodity Exchange Act preempt state gambling laws when it comes to event contracts?) is now being decided in multiple federal appeals courts simultaneously. And they are not agreeing with each other.

If the Ninth Circuit rules against Kalshi (affirming the Nevada district court), a formal circuit split with the Third Circuit would exist. That dramatically increases the probability of Supreme Court review. Certiorari petitions could be filed by early 2027, with the Court potentially granting review during its October 2027 term. The law firm Holland & Knight has noted that more than 34 states plus DC have filed amicus briefs asserting state regulatory authority, a level of opposition that may independently attract the Court’s attention even without a formal split.

There’s also a legislative wildcard. Senators John Curtis (R-Utah) and Adam Schiff (D-Calif.) introduced the Prediction Markets Are Gambling Act (S.4060) on March 23, 2026, which would reclassify sports and casino-style event contracts as gambling outside CFTC jurisdiction. If enacted, it would moot most of the ongoing litigation entirely by stripping prediction markets of their federal shield for sports contracts.

Whether it has the votes to pass is anyone’s guess, but the bipartisan sponsorship is notable. In fact this is only one of at least eight federal bills proposed in 2026 that would regulate or curtail prediction markets to varying extents. The likelihood of any of these bills become law, overall, is narrow, but that calculus may change if the Democratic Party takes control of both the House and Senate come November, an outcome that is currently priced at about a 48% possibility for Yes.

⚖️ The Trump administration’s role

This is not a neutral regulatory environment. The current administration is actively siding with prediction market platforms against state regulators.

CFTC Chairman Michael Selig, confirmed in November 2025, has filed amicus briefs asserting exclusive federal jurisdiction over event contracts. On April 2, 2026, the CFTC took the extraordinary step of suing four states directly: Arizona, Connecticut, Illinois, and New York. The lawsuits ask federal courts to declare that states have no authority to regulate CFTC-licensed exchanges. In Arizona, a federal judge granted the CFTC’s motion for a temporary restraining order that halted the state’s criminal prosecution of Kalshi.

To put that in perspective: a federal regulatory agency is suing state attorneys general to stop them from enforcing state law. That’s an aggressive posture by any measure. “The CFTC will continue to safeguard its exclusive regulatory authority over these markets,” Selig said in a statement.

⚖️ Insider trading and market integrity

The legality question isn’t just about whether prediction markets can exist. It’s also about what happens on them once they do.

On April 23, 2026, the Department of Justice filed what appears to be the first-ever criminal charges for insider trading on a prediction market. U.S. Army soldier Gannon Ken Van Dyke was charged with commodities fraud, wire fraud, and unlawful use of classified government information after allegedly making $409,881 in profit on Polymarket’s offshore site by betting on Venezuela-related markets ahead of the January 3 raid that captured President Maduro. According to the DOJ, Van Dyke participated in the planning of the operation, then created a Polymarket account on December 26, 2025, placed roughly 13 bets totaling about $33,000 in stakes, and attempted to cover his tracks by routing proceeds through a foreign crypto vault and asking Polymarket to delete his account. He faces charges carrying up to 20 years in prison.

The Van Dyke case wasn’t an isolated incident. Earlier in 2026, sharp upticks in contracts predicting U.S. military strikes on Iran appeared on Polymarket shortly before those strikes occurred in February. The CFTC issued an advisory on February 25, 2026, addressing insider trading on prediction markets and discussed two separate Kalshi enforcement actions: one against a political candidate trading on his own race, another against an employee trading on contracts tied to his employer’s YouTube channel (Mr. Beast). Kalshi imposed penalties and suspensions in both cases.

Congress has responded with multiple bills. The Prediction Markets Security and Integrity Act (S.4060) would prohibit the use of material non-public information on prediction markets entirely. The Public Integrity in Financial Prediction Markets Act (H.R.7004) would specifically bar government officials from trading contracts related to their duties. CFTC Chair Selig stated after the Van Dyke indictment that “anyone who engages in fraud, manipulation, or insider trading in any of our markets will face the full force of the law.”

This matters because perception matters, and market integrity issues give state regulators ammunition. Every insider trading scandal makes the “these are unregulated gambling sites” argument more persuasive to judges and legislators. As InGame has reported, prediction market controversies are already affecting sports betting legalization efforts in states like Minnesota. Kalshi and Polymarket’s long-term legal standing depends in part on whether they can convince courts (and the public) that adequate safeguards exist. For more on who you’re trading against and how markets are monitored, see our peer-to-peer sports betting guide.

⚖️ Class action lawsuits

Beyond the state regulatory battles, prediction markets face a growing wave of private litigation. As of April 2026, there are class action lawsuits against Kalshi in New York (multiple consolidated cases), Illinois, Oregon, California, Georgia, Alabama, and Massachusetts. Two separate class actions target Polymarket in New York. Crypto.com faces class actions in Illinois and Florida.

The most unusual legal theory comes from a batch of “Statute of Anne” lawsuits filed in Ohio, Kentucky, Illinois, Massachusetts, South Carolina, and Georgia. These invoke centuries-old laws (dating back to an 18th-century British statute) that allow gambling losers to sue winners to recover their losses. Whether these claims survive in the context of CFTC-regulated exchanges is an open legal question, but their existence signals how many different legal theories are being deployed against the industry simultaneously.

The California and New York class actions over Kalshi’s refusal to resolve Iranian regime change contracts as “Yes” after Ayatollah Khamenei’s death are a different category entirely, raising questions about how prediction markets handle ambiguous resolution criteria. For more on settlement dispute history, see the Kalshi review and the Kalshi bonus page.

KYC and residency requirements

Regardless of the legal battles, every CFTC-regulated prediction market requires Know Your Customer (KYC) verification before you can withdraw funds. You’ll need to provide a government-issued ID and proof of address (a recent utility bill or bank statement, not a P.O. Box). This is a federal anti-money-laundering requirement, not a platform policy choice.

One wrinkle I’ve seen trip people up: you need to actually reside in the state you’re signing up from, not just be visiting. You can deposit and trade as a tourist, but KYC verification for withdrawals requires proof of a physical address in your current state. If you’re traveling and want to try a platform, you can open an account and experiment with small trades, but plan to complete verification from your home address.

🛡️ Responsible gambling

Prediction market trading carries real financial risk. Contracts can expire worthless. The legal uncertainty described on this page adds another layer: if your state restricts a platform while you have open positions, the resolution process could be complicated. Kalshi integrated IC360’s SelfExclude tool in April 2026, the first prediction market to offer cross-platform voluntary self-exclusion. Polymarket’s responsible gambling features remain limited. Traditional sportsbooks are further ahead on this front.

Frequently Asked Questions

Can I trade in a state that’s suing Kalshi?

In almost every case, yes. Litigation alone doesn’t restrict access. The only states where platforms are actually blocked as of April 2026 are Nevada (mostly blocked) and Massachusetts (sports contracts only, pending). In every other state with active lawsuits, including New York, Arizona, Ohio, Michigan, and Wisconsin, platforms remain live and operational while cases proceed through the courts.

What happens to my positions if my state restricts prediction markets?

We have one real-world example so far. When Nevada’s temporary restraining order took effect in March 2026, Kalshi emailed Nevada users and adjusted the platform so that residents could exit existing positions but could not initiate new trades in restricted categories (sports, elections, entertainment). Non-restricted markets like weather and economics remained accessible.

In Massachusetts, the geofencing order specifically targets sports contracts, so non-sports positions were unaffected. In both cases, you weren’t locked into positions with no way out. That said, Kalshi itself acknowledged the Nevada situation was “unprecedented,” and future court orders in other states may be structured differently. If you have longer-term open positions and live in a state with active litigation, it’s worth checking with platform support about contingency plans rather than assuming the Nevada precedent will apply everywhere.

Are prediction market profits taxed differently than sports betting winnings?

Potentially, but the IRS hasn’t issued definitive guidance. Kalshi operates as a CFTC-regulated financial exchange, and some tax professionals argue that trades should be treated like other financial instruments (Section 1256 contracts) where 100% of losses offset gains. Sports betting winnings are taxed as ordinary income with limited loss deductions. The Kalshi bonus page covers the tax question in more detail, but consult a tax professional for your specific situation.

Related InGame coverage

• States Rights vs. Federalism: Can Prediction Markets Be Kept at Bay?
• Massachusetts Puts Kalshi On The Defensive, Sues In State Court
• U.S. Prediction Markets: A Modern Timeline
• What Are Prediction Markets? How Do They Work?
• Prediction Markets Explained: How Prediction Trading Works in Sports
• Best Prediction Market Sites for Sports Betting in 2026
• Kalshi Bonus Page (includes state litigation table)
• Peer-to-Peer Sports Betting: How Does It Work?
• Kalshi To Give Rebates To Sportsbooks As It Courts Traders To Hedge Sports Results