Prediction Markets vs CFTC: 40 States Push Back on Kalshi

Forty U.S. states, led by attorneys general, have urged the CFTC to keep sports-related prediction markets under state gambling oversight rather than federal derivatives regulation. In a letter to CFTC Chairman Michael S. Selig dated April 30, 2026, the states argued these contracts function as wagers—similar to traditional sportsbook bets on game winners, point spreads, totals, and player statistics—not as swaps or other financial derivatives. The coalition said the CFTC does not have exclusive authority because the underlying transactions do not create the kind of financial, economic, or commercial exposure derivatives are designed to hedge. They warned that broad CFTC oversight could weaken protections aimed at gambling harms and integrity, citing licensing rules, minimum age requirements, voluntary self-exclusion, suspicious activity reporting, and anti–insider practices. The legal stakes have intensified for Kalshi. A Tennessee federal court granted Kalshi a preliminary injunction on Feb. 19, finding it likely could succeed on arguments that its contracts qualify as swaps under the Commodity Exchange Act. On April 6, the Third Circuit affirmed an injunction against New Jersey, saying federal preemption likely shields Kalshi from state gambling enforcement. The CFTC has also been involved in a related enforcement push: prosecutors and the agency joined a first-of-its-kind prediction market insider trading case involving an Army soldier accused of using nonpublic government information. Dozens of attorneys general are also supporting a Massachusetts lawsuit challenging state enforcement against Kalshi, which could shape whether state gambling regulators can act against similar prediction market products nationwide. Keywords: CFTC, prediction markets, Kalshi, sports betting, Commodity Exchange Act, federal preemption.