Prediction Markets Escalate Their US Regulatory Battle

United States.- 15 September 2026 | www.zonadeazar.com The regulatory battle over sports prediction markets in the United States has entered a new phase, with simultaneous disputes involving exchanges, states, federal regulators and tribal authorities increasingly converging towards the US Supreme Court.

The Commodity Futures Trading Commission has asked a federal court to prevent Connecticut from enforcing state gambling laws against prediction market platforms, while Robinhood has moved to intervene directly in the litigation.

Separately, Crypto.com has joined efforts to secure Supreme Court review of a ruling allowing Nevada to apply state gambling law to sports event contracts.

New Jersey has already filed its own Supreme Court petition in a separate case involving Kalshi.

Together, these disputes raise one of the most consequential questions facing the US betting sector: whether sports event contracts are financial instruments subject primarily to federal commodities regulation or wagers that states can regulate as sports betting.

Connecticut Becomes a Major Battleground

Connecticut is now one of the central fronts in the dispute.

The CFTC filed for a preliminary injunction seeking to prevent the state from applying its gambling laws to certain prediction market businesses.

The filing was made on 11 September in the US District Court for the District of Connecticut.

CFTC Enters the Fight Directly

The regulator’s participation is particularly significant.

Many previous cases involved exchanges suing state gaming authorities directly.

The CFTC’s action turns the Connecticut dispute into a more explicit contest over federal regulatory authority.

Connecticut Issues Cease-and-Desist Orders

The dispute intensified after Connecticut issued cease-and-desist orders against nine prediction market platforms.

The state argues that certain sports contracts amount to wagering activity requiring authorisation under state gambling law.

Nearly 30 Subpoenas

Connecticut’s investigation has also generated nearly 30 subpoenas.

That scale suggests the state is examining a wider ecosystem rather than pursuing a single company.

Robinhood Seeks to Intervene

On the same day as the CFTC filing, Robinhood asked to intervene in the case.

The company was itself a recipient of one of Connecticut’s enforcement orders.

Robinhood argues that the state’s actions give it a direct commercial interest in the outcome.

Connecticut Does Not Oppose Intervention

The state has not opposed Robinhood’s request to join the proceedings.

That should allow the company to defend its position directly.

Kalshi Previously Lost Preliminary Relief

The Connecticut dispute follows an earlier setback for Kalshi.

A federal judge rejected Kalshi’s request for a preliminary injunction in August.

The court also rejected a request for relief pending appeal.

Connecticut Subsequently Sued Kalshi

Following those decisions, Connecticut brought an enforcement action against the exchange.

Kalshi maintains that its contracts fall under federal commodities regulation.

The state believes certain products constitute sports wagering.

Coinbase Has Also Sued

Coinbase has launched its own case against Connecticut.

That litigation is currently stayed.

The range of companies involved demonstrates how broadly the dispute now extends across financial and trading platforms.

Crypto.com Heads Towards Supreme Court

A separate legal front involves Crypto.com.

North American Derivatives Exchange filed a Supreme Court petition on 11 September challenging a ruling connected with Nevada.

Ninth Circuit Decision

The case follows an August 28 decision from the Ninth Circuit.

The court concluded that the Commodity Exchange Act did not prevent Nevada from applying its gambling laws to sports event contracts.

Commodity Exchange Act at the Centre

The key question is whether the Commodity Exchange Act, CEA, preempts state gaming regulation when contracts are listed on a federally supervised derivatives exchange.

Prediction market companies favour a broad federal interpretation.

States strongly disagree.

Nevada Defends State Authority

Nevada argues that it has long-standing authority to regulate wagering activity occurring within its borders.

A broad federal preemption theory could substantially reduce that authority.

Robinhood Has Also Petitioned the Supreme Court

Robinhood filed a separate Supreme Court petition during the previous week.

Crypto.com’s move adds further pressure for national judicial clarification.

New Jersey Has Its Own Petition

The Supreme Court is also considering a petition from New Jersey.

The state is challenging a Third Circuit ruling that favoured Kalshi.

Conflicting Federal Appeals Decisions

The divergence between circuits is becoming increasingly important.

The Third Circuit has taken a position favourable to Kalshi.

The Ninth Circuit has allowed Nevada to enforce its rules.

Circuit Split May Encourage Review

Conflicting appellate decisions are one of the factors that can make Supreme Court review more likely.

A national ruling could establish a single legal standard.

The Fundamental Question

At its simplest, the issue is this:

Can a state regulate a sports event contract as sports betting when that contract is offered through a CFTC-regulated exchange?

The answer could determine the structure of the sector.

Two Regulatory Models Collide

The dispute brings two fundamentally different systems into conflict.

On one side are:

• The CFTC.
• The Commodity Exchange Act.
• Derivatives exchanges.
• Federal supervision.

On the other are:

• State gaming regulators.
• Sports betting laws.
• State licences.
• State taxation.
• Local player protections.

Prediction Markets Back Federal Model

Platforms argue that event contracts are financial instruments.

Under this interpretation, a federally regulated exchange could potentially offer products nationally without obtaining sportsbook licences in every state.

States View the Products as Betting

State regulators focus on the underlying activity.

Where customers take positions on which team wins or whether a particular sporting event occurs, authorities may see little practical difference from a sports wager.

Commercial Consequences Are Significant

The classification determines far more than legal terminology.

A federal model offers national scale.

A state model creates a jurisdiction-by-jurisdiction licensing requirement.

Access in Non-Betting States

Prediction market platforms can potentially offer sports contracts in jurisdictions without legalised traditional sports betting.

That is one of the model’s most disruptive features.

Direct Sportsbook Competition

Traditional operators are watching closely.

If sports event contracts remain widely available, prediction markets could compete directly with licensed sportsbooks.

Different Tax Structures

Sportsbooks generally pay state-specific taxes and licence fees.

Prediction exchanges operate under a different federal structure.

This has fuelled complaints about regulatory and economic asymmetry.

Ho-Chunk Adds Tribal Gaming Dimension

The dispute has also reached tribal gaming.

A Wisconsin federal judge has allowed Kalshi and Robinhood to seek an immediate appeal in the challenge brought by the Ho-Chunk Nation.

Two Questions Certified

Judge William Conley certified two questions for potential interlocutory appeal.

One involves whether the Commodity Exchange Act or Unlawful Internet Gambling Enforcement Act preempts tribal authority under the Indian Gaming Regulatory Act.

Indian Gaming Regulatory Act

The IGRA forms a core part of the legal framework governing tribal gaming.

A finding of broad federal preemption could therefore carry implications for tribal sovereignty.

Earlier Ruling Favoured Ho-Chunk

Conley had previously found that federal commodities law did not eliminate Ho-Chunk’s authority over sports event contracts offered on tribal lands.

Potential Supreme Court Route

The judge acknowledged conflicting decisions around the country and recognised that the dispute could ultimately require Supreme Court resolution.

Seventh Circuit Must Agree

The Seventh Circuit must first accept the interlocutory appeal.

The case remains stayed while that question is decided.

Multiple Circuits Now Involved

With disputes touching the Third, Seventh and Ninth Circuits, plus active cases elsewhere, the legal landscape is increasingly fragmented.

That fragmentation strengthens calls for nationwide clarity.

NFL Pressure Adds Another Dimension

Judicial conflict is occurring alongside increased scrutiny from the NFL.

The league has expressed concern over certain event-contract categories involving players and sporting outcomes.

Kalshi Removes Player Participation Contracts

Kalshi recently removed markets related to whether NFL players would participate in Week 1 games.

Regulatory Discussions Prompted Removal

The withdrawal followed regulatory discussions.

That demonstrates how commercial product offerings are already being shaped before courts resolve the broader jurisdictional dispute.

Existing Positions Will Still Be Settled

Kalshi informed customers that previously purchased contracts would receive special treatment.

Winning positions will be paid according to the relevant outcomes.

Losing Positions Reimbursed

Customers whose positions settle as losses will be reimbursed for the cost of those positions.

Sports Integrity Concerns

The NFL episode introduces another major issue.

Markets based on injuries, availability and internal team decisions create concerns regarding access to non-public information.

Insider Information

Knowledge about injuries or roster decisions may be available to certain people before the wider market.

That raises a distinct integrity risk.

Prediction Markets and Professional Leagues

Professional sports leagues are being forced to define which contract categories they consider acceptable.

Different products can create different levels of integrity risk.

NFL Seeks Boundaries

The NFL has taken a cautious approach toward contracts that could involve sensitive internal information.

This creates additional pressure on exchanges.

Europe Begins Examining the Sector

Prediction markets are also drawing attention outside the United States.

The European Securities and Markets Authority, ESMA, included them in its latest risk analysis.

Limited European Adoption

ESMA said these products have not yet gained the same traction in Europe.

Regulatory complexity is one reason.

MiFID II

Certain event contracts could potentially fall under MiFID II.

That would create financial-market compliance requirements.

MiCA

Other structures may intersect with MiCA, particularly where digital assets are involved.

National Gambling Law

Individual countries may also apply national gambling legislation.

This creates another layer of complexity.

Platforms Lack EU Authorisations

ESMA noted that major platforms generally do not hold the European authorisations required to market such products.

VPN Concerns

The regulator also questioned the effectiveness of geographical restrictions.

Users may attempt to access blocked platforms through VPNs.

Geofencing Under Scrutiny

This issue mirrors concerns in several gambling markets.

Formal exclusion of a territory does not necessarily guarantee complete user exclusion.

Sunderland Signs Shuffle

While prediction markets dominate US regulatory debate, English football provides another example of the changing relationship between sport and gambling.

Sunderland has signed a multi-year sleeve sponsorship agreement with Shuffle.

Crypto Casino and Sportsbook

Shuffle operates as a crypto casino and sportsbook licensed in Curaçao.

It replaces LiveScore Bet on the club’s sleeve.

First Season of Front-of-Shirt Ban

The deal arrives during the first Premier League season under the voluntary ban on front-of-shirt gambling sponsorship.

Gambling Logos Remain on Kits

The policy has not removed gambling branding from football kits entirely.

Sleeves remain available.

Several Clubs Use Betting Sleeve Sponsors

Sunderland joins clubs including:

• Aston Villa.
• Everton.
• Bournemouth.
• Brentford.
• Crystal Palace.
• Nottingham Forest.

Commercial Inventory Shifts

The pattern illustrates how restrictions on one sponsorship asset can redirect investment towards another.

Sleeves, perimeter advertising and regional partnerships have become more valuable.

Another Important Week Ahead

The coming days contain several additional prediction-market developments.

New York is another jurisdiction to watch closely.

CFTC Faces New York

A hearing is scheduled over the CFTC’s request to prevent New York from enforcing state action against prediction markets.

A defeat could leave the state free to continue or intensify enforcement.

Geofencing Could Become More Important

State authorities may increasingly demand location-based restrictions.

That would undermine the exchanges’ ability to operate as truly nationwide platforms.

New Jersey Considers Advertising Resolution

New Jersey lawmakers are also due to consider AR 150.

The resolution calls for restrictions on targeted gambling advertisements aimed at people showing signs of problem gambling or addiction.

Sportsbooks Versus Prediction Markets

The NFL season adds a commercial dimension to the legal dispute.

Early activity figures may reveal whether prediction markets are attracting customers who would otherwise use traditional sportsbooks.

Sportsbook Growth Under Pressure

Some forecasts point towards relatively modest growth in regulated sportsbook activity.

That increases attention on alternative products.

Prediction Markets Expand Distribution

Event contracts can be distributed through brokers, financial apps and exchanges with large existing audiences.

This differs considerably from traditional sportsbook distribution.

Robinhood Demonstrates the Opportunity

Robinhood already has a large consumer base built around investing and trading.

Adding prediction contracts introduces event-based products directly inside a mainstream financial platform.

Trading and Betting Converge

Customers can increasingly access from one app:

• Equities.
• Cryptocurrencies.
• Derivatives.
• Sports event contracts.

That convergence challenges traditional legal categories.

Classification Determines Regulation

How these products are defined determines:

• Which regulator has authority.
• Which taxes apply.
• What consumer protections are required.
• Where the products can be offered.

CFTC Defends Federal Authority

The regulator’s Connecticut action demonstrates that the CFTC sees the issue as more than a private business dispute.

It is willing to defend the scope of federal authority directly.

States Have Strong Incentives to Resist

States have equally strong reasons to maintain control.

Sports betting generates:

• Tax revenue.
• Licensing fees.
• Employment.
• Consumer protection mechanisms.
• Regulatory authority.

A parallel federal route could undermine that framework.

Traditional Sportsbooks Are Watching SCOTUS

The eventual Supreme Court outcome could affect far more than Kalshi, Robinhood or Crypto.com.

A broad preemption decision might reshape the competitive structure of US sports wagering.

Potential Structural Shift

If the Supreme Court finds that the CEA prevents state regulation, CFTC-regulated exchanges could gain a significant nationwide advantage.

If states prevail, prediction platforms may need to adapt on a jurisdiction-by-jurisdiction basis.

Market Expands While Law Remains Unsettled

Despite uncertainty, the industry continues to grow.

New partnerships and distribution models are developing before final legal clarity exists.

Industry Context

Prediction markets have moved far beyond their earlier association with politics or economic events.

Sports contracts have turned them into potential competitors to America’s regulated sportsbook industry.

That shift has made conflict with states, tribes, gambling operators and professional leagues increasingly difficult to avoid.

The varying court decisions of 2026 demonstrate that no uniform legal interpretation currently exists.

Next Steps and Impact

The Supreme Court must first decide whether it will hear any of the petitions currently before it.

Crypto.com, Robinhood and New Jersey are seeking answers from different legal directions, while Kalshi remains involved in litigation across several jurisdictions.

Connecticut is now another crucial front, with the CFTC itself seeking to block state enforcement and Robinhood moving to participate directly.

The Ho-Chunk dispute could next move into the Seventh Circuit, while New York remains another active battleground.

At the same time, the NFL is already influencing product design, Europe is beginning to analyse prediction-market risks and traditional sportsbooks are watching whether sports contracts begin materially changing customer behaviour.

The eventual legal outcome may determine whether US sports prediction markets develop into a federally regulated nationwide financial market or become subject, at least in part, to the same state-by-state structure governing conventional sports betting.

Editó: @fonta