Prediction Markets Face Legal Challenges Across 22 US States
United States.- 30 October 2026 | www.zonadeazar.com Tax analysis platform Realize has updated its tracker of prediction market litigation in the United States, identifying 22 states with lawsuits, court orders, rulings or regulatory enforcement actions involving the sector.
Updated between 28 and 29 October 2026, the report examines the legal position of eight platforms: Kalshi, Polymarket, Robinhood, Coinbase, Crypto.com, Novig, Underdog Predict and Webull.
The findings highlight the growing conflict between state gambling authorities and companies offering contracts linked to sporting outcomes and other events.
Eight Platforms Under Review
Realize compiles judicial and regulatory documentation to assess the legal position of major prediction market platforms.
The recorded actions cover:
- Kalshi: 21 states with documented actions.
- Robinhood: 12 states.
- Polymarket: 10 states.
- Coinbase: 8 states.
- Crypto.com: 6 states.
- Novig: 4 states.
- Underdog Predict: 4 states.
- Webull: 3 states.
These figures reflect the latest available checks for each platform and do not necessarily indicate active court proceedings in every state.
The tracker distinguishes between lawsuits, cease-and-desist notices, injunctions and other regulatory developments.
Kalshi Faces the Widest Range of Disputes
Kalshi has the largest presence in the tracker, with documented actions across 21 states.
The disputes include regulatory demands, court proceedings and disagreements concerning jurisdiction over sports event contracts.
One recent development was the Commodity Futures Trading Commission’s (CFTC) lawsuit against Utah, filed on 26 October 2026.
The federal regulator’s involvement highlights the significance of the dispute over the authority responsible for supervising these products.
Michigan, Nevada and Washington Record Restrictions
The tracker identifies three states where certain court decisions or agreements have resulted in restrictions on specific markets:
- Michigan.
- Nevada.
- Washington.
These restrictions do not necessarily apply to every platform or category of event contract.
Their scope depends on the individual proceedings, the companies involved and the terms of the relevant decisions.
The report emphasises the importance of distinguishing between pending legal challenges and restrictions that are already in effect.
State and Federal Regulatory Jurisdiction
The central legal dispute concerns how contracts based on sporting outcomes should be classified.
State authorities maintain that certain products constitute sports betting and must therefore comply with local licensing and regulatory requirements.
Prediction market platforms argue that these contracts are financial instruments traded on federally regulated exchanges and fall under the CFTC’s jurisdiction.
These competing interpretations have prompted proceedings across multiple jurisdictions.
Federal appellate courts have also adopted differing positions, leaving questions about the boundaries of state and federal authority unresolved.
Utah Joins the Regulatory Dispute
One of the tracker’s latest developments concerns Utah.
The report records that, on 26 October 2026, the CFTC filed a lawsuit against state authorities.
The action relates to Utah’s efforts to apply its gambling legislation to certain sports event contracts.
The tracker also documents a separate lawsuit filed by Utah’s Attorney General against Kalshi on 20 October.
Together, the proceedings demonstrate how state and federal litigation can arise from the same underlying regulatory dispute.
Three Petitions Before the Supreme Court
Realize also identifies three petitions relating to prediction market disputes submitted to the US Supreme Court.
According to the tracker, none had been granted at the time of its update.
This means the country’s highest court had not yet issued a definitive ruling establishing a uniform approach to regulatory jurisdiction over sports event contracts.
In the meantime, operators must continue addressing judicial and administrative proceedings in different states.
Tax Classification Remains Uncertain
Alongside regulatory litigation, Realize examines uncertainty surrounding the taxation of event contracts.
The platform notes that the Internal Revenue Service (IRS) had not issued specific guidance on these instruments.
Its tracker identifies three approaches used by US taxpayers:
- Reporting gains and losses under gambling tax provisions.
- Applying standard capital gains and losses rules.
- Using the tax treatment available to certain financial contracts under Section 1256.
Realize cautions that these approaches should not be interpreted as universally applicable or legally established for every event contract.
The appropriate classification depends on the characteristics of the instrument and applicable tax law.
Legal Monitoring and Documentation
The tracker was developed by Owen Monagan, Founder and CEO of Realize.
The platform brings together information from court filings, regulatory documents and official announcements.
Its purpose is to help users monitor legal proceedings affecting prediction market companies.
Visitors can examine developments by state and platform, including dated actions and supporting documentation.
Realize emphasises that its content is informational and does not constitute legal, financial or tax advice.
Industry Impact and Next Steps
The tracker illustrates the complexity of the US regulatory environment for prediction market platforms.
Proceedings across 22 states demonstrate the continuing disagreement over the legal classification and supervision of sports event contracts.
Upcoming court decisions could alter the operating conditions of certain platforms, although their effects will depend on the scope of each ruling.
With Kalshi facing documented actions across 21 states and seven other platforms under review, Realize’s tracker shows that the dispute between federal and state regulators has become a major legal challenge for US prediction markets.
Edited by: @fonta
