Prediction markets are federally legal in the United States. They are also the subject of active legal challenges across roughly a dozen states, the first federal appeals-court ruling on the question (the Third Circuit, which sided with the platforms in early April 2026), a wave of CFTC lawsuits brought against individual states, the first outright state ban (Minnesota, effective 1 August 2026), a growing set of tribal-nation lawsuits, a Supreme Court question that is almost certain to be granted in 2026 or 2027, and a bipartisan bill introduced in Congress in March 2026 that would restrict them further. The answer to whether prediction markets are legal in the US in mid-2026 is: yes, and also, it depends where you live, what you want to trade, and how the courts rule in the next twelve months.
The contradiction is real and it is structural. Federal law, specifically the Commodity Exchange Act, grants the CFTC exclusive jurisdiction over transactions on designated contract markets. Kalshi and Polymarket US are both CFTC-designated. Under the CFTC's reading, this means state gambling commissions have no authority over their contracts. Under the reading a growing number of states have advanced, Nevada, Massachusetts, Tennessee, Ohio, New Jersey, Arizona, Connecticut, Illinois, New York, Wisconsin and Minnesota among them, states retain their traditional police-power authority to regulate gambling within their borders, regardless of how a platform labels its product. Courts have split on which reading wins. The question is now escalating through the federal appeals courts and is widely expected to reach the Supreme Court.
This guide covers the federal framework, the state-by-state picture as of mid-2026, the pending legal questions, and what it means in practice for users. The law is moving quickly, particularly on the state level, so always verify current status directly with the platform and your state before trading. Nothing here is legal or financial advice.
The federal position
At the federal level, prediction markets operating as CFTC-designated contract markets are legal and regulated. Kalshi has held its designation since 2020. Polymarket US inherited QCEX's designation in November 2025 following the $112 million acquisition and CFTC's Amended Order of Designation. Robinhood launched CFTC-registered event contracts in 2025 and reached $200 million in revenue in its first full year. Crypto.com operates a parallel prediction-market product under similar structure.
The CFTC's position, stated repeatedly and most recently in amicus briefs filed in the Ninth Circuit litigation, is that event contracts on designated platforms are "swaps" under the Commodity Exchange Act and fall within its exclusive jurisdiction. Under this reading, state gambling laws are preempted, states cannot regulate products that Congress has placed under federal derivatives authority. The CFTC has also entered a Memorandum of Understanding with Major League Baseball, a signal of how seriously it takes its jurisdictional claim over sports-event contracts.
The state regulators disagree. Their argument, advanced in litigation across multiple jurisdictions, is that federal preemption is narrower than Kalshi claims. The doctrine of conflict preemption, the more common standard, holds that federal law only displaces state law where the two genuinely conflict or where the state regulation obstructs federal objectives. Several courts have been sceptical that the CFTC's desire for a unified national approach to prediction markets satisfies that standard, particularly given states' long-recognised authority to regulate gambling.
The state-by-state picture
As of mid-2026, the state situation for Kalshi, the most legally-tested prediction-market platform, breaks down roughly as follows. Polymarket US is not a live player in most of this litigation because it remains invite-only and is not currently the target of enforcement actions. What affects Kalshi now will probably affect Polymarket US when it rolls out more widely.
Available without meaningful restriction
Around 40 states allow Kalshi to operate without active legal challenge as of mid-2026. This includes most of the South, the Midwest, and much of the West. In these states, you can sign up, fund your account, and trade. The absence of challenge is not a guarantee, state regulators can and do change their positions, but for now these states are operationally clean.
Active state-level challenges with mixed outcomes
The number of states involved has grown sharply since April. By mid-2026, roughly a dozen states had cease-and-desist actions, civil suits, criminal charges, fines, or outright bans in progress, with the CFTC counter-suing several of them in federal court. The most significant individual actions are below.
- New Jersey. In a 2-1 decision in early April 2026, the Third Circuit became the first federal appeals court to rule on the question, affirming Kalshi's preliminary injunction and holding that sports event contracts on a CFTC-registered exchange are "swaps" under the Commodity Exchange Act and that the CEA preempts state gambling laws as applied to them. Judge David Porter wrote the majority, joined by Chief Judge Michael Chagares; Judge Jane Roth dissented, calling the products "virtually indistinguishable" from online sportsbook bets. The ruling blocks New Jersey enforcement at least through any Supreme Court review.
- Nevada, A Ninth Circuit panel in March 2026 denied Kalshi's emergency motion for an administrative stay, clearing the way for state enforcement; a state court temporary injunction is in place.
- Massachusetts. The Superior Court ruled against Kalshi in January 2026 finding its contracts are subject to state gaming law; the Appeals Court stayed the injunction and the case is heading for the Supreme Judicial Court.
- Tennessee. The federal District Court granted Kalshi a preliminary injunction in February 2026, finding its contracts likely are swaps and state law likely is preempted.
- Ohio. The District Court denied Kalshi's motion for preliminary injunction in March 2026, siding with state regulators.
- Arizona, An open enforcement action alleging Kalshi offers unlicensed gambling.
- Minnesota. The prediction-market ban, carried in Minnesota's public-safety omnibus (SF4760, signed 18 May 2026), takes effect 1 August 2026, making it a felony to operate or advertise these markets in the state. The ban reaches operators, payment processors, advertisers, and data providers, with a narrow carve-out for genuine insurance-style and securities or commodities contracts. The CFTC sued Minnesota within roughly 24 hours of signing, and Kalshi filed its own federal suit on 28 May 2026, both arguing the contracts are federally regulated swaps the state cannot ban.
- CFTC counter-suits (Arizona, Connecticut, Illinois, and more). On 2 April 2026 the CFTC went on the offensive, filing federal declaratory-and-injunctive-relief actions against Arizona, Connecticut, and Illinois, asking the courts to rule that state gambling laws are invalid as applied to CFTC-registered contract markets. It has since added suits against New York and Wisconsin (the Wisconsin complaint filed in late April 2026) and against Minnesota. A federal court granted a temporary restraining order blocking Arizona's criminal prosecution. CFTC Chairman Michael Selig framed the campaign as defending the agency's "exclusive regulatory authority" against "overzealous state regulators."
The pattern: courts that reach preemption on the merits are splitting. Federal courts have tended to side with Kalshi on the swaps question (Tennessee, New Jersey). State courts and some federal courts have sided with state regulators (Ohio, Massachusetts at first instance, Nevada in part). The Third Circuit's April 2026 ruling was the first federal circuit decision and went Kalshi's way. The Ninth Circuit's pending ruling in the Nevada case is the one to watch, if it goes against Kalshi, the circuit split is definitive and Supreme Court review becomes highly likely.
Access currently constrained by state proceedings
In mid-2026, Kalshi is not accepting new users from certain states pending litigation outcomes. The exact list rotates with the legal status of each state's proceedings, if you are in Nevada, you cannot currently trade sports-related contracts on Kalshi because of the state court injunction. If you are in Ohio, similar restrictions apply. Check Kalshi's own current state-availability page before assuming you can sign up.
Venue availability by state
| State | Kalshi status |
|---|---|
| ~40 states, no active action | Operates |
| New Jersey, Tennessee | Operates (protected by injunctions Kalshi won) |
| Nevada | Sports contracts blocked (state-court injunction) |
| Ohio | Restricted (lost its motion; state fine reported) |
| Arizona | Contested (criminal charges; CFTC won an order blocking prosecution) |
| Massachusetts | Contested (injunction stayed; SJC review pending) |
| Connecticut, Illinois, New York, Wisconsin | Contested (CFTC suing the state) |
| Minnesota | Blocked from 1 Aug 2026 unless courts intervene |
Polymarket's US product is invite-only/intermediated, so no reliable per-state map exists for it; Robinhood routes CFTC contracts through partners including Kalshi, so it shares Kalshi's exposure where those are contested (it's a co-defendant in the Ho-Chunk tribal suit); Minnesota's ban hits all three.
The tribal gaming front
State regulators are not the only ones challenging prediction markets. A growing set of tribal nations argues that sports event contracts amount to unlicensed sports betting on tribal lands, and that letting them run nationwide would gut the gaming exclusivity tribes negotiated under the Indian Gaming Regulatory Act (IGRA) and their state compacts.
The argument runs parallel to the states' gambling-regulation case but rests on different ground. Under IGRA, tribes hold exclusive authority over Class III gaming on their lands, secured through federally approved compacts. The tribes contend that if the CFTC's "these are swaps, not gambling" position prevails, any company could offer sports wagering everywhere, including on tribal lands, without ever negotiating a compact or meeting IGRA's requirements. They point to practical mismatches too: Kalshi admits users at 18, while tribal sportsbooks require patrons to be 21.
Two developments stand out as of mid-2026:
- Ho-Chunk Nation (Wisconsin). The Ho-Chunk Nation sued Kalshi and its partner Robinhood, arguing they run unlicensed sports betting through binary event contracts. In May 2026 a federal judge in the Western District of Wisconsin allowed the IGRA claims to proceed and found the tribe had shown a likelihood of success on the merits, a notable setback for the platforms.
- New Mexico tribes. In May 2026, four New Mexico tribes (the Mescalero Apache Tribe and the Pueblos of Isleta, Pojoaque, and Sandia) filed a federal suit alleging Kalshi's sports event contracts are "functionally indistinguishable from sports wagering" and violate IGRA and their compacts. They seek an injunction, a declaration that the conduct is unlawful, and civil and punitive damages.
The Indian Gaming Association has signalled it is no longer waiting on federal regulators, pursuing what it calls a parallel path of litigation and lobbying. For tribes, this is framed as an existential threat: gaming revenue underwrites tribal government services, and a nationwide sports-event-contract market that bypasses compacts would erode the exclusivity those revenues depend on.
The federal preemption question
At the heart of every state-level dispute is a single legal question: does the Commodity Exchange Act's grant of exclusive jurisdiction to the CFTC over transactions on designated contract markets preempt state authority to regulate those transactions as gambling?
Kalshi's argument is that Congress explicitly made CFTC jurisdiction exclusive. The statute says so in terms. A designated contract market is a federal instrument, and states cannot use their gambling-regulation authority to override that. If they could, Kalshi argues, the CFTC's entire regulatory structure would be undermined, any state could unilaterally decide which federally-approved financial products its residents could access.
The state regulators' argument is that federal preemption is narrower than that. Under the Supreme Court's 2018 ruling in Murphy v. NCAA, the federal government cannot commandeer state regulatory authority, and states retain their traditional police power to regulate gambling. The CFTC's desire for national uniformity does not satisfy the standard for preemption. And Congress, when drafting the Commodity Exchange Act, did not anticipate or authorise its use to bypass state gambling regulation, which the 2024 Loper Bright decision, removing judicial deference to agency interpretations, makes easier to argue.
Both arguments have serious force. That is why courts are splitting. The Supreme Court has not yet taken the question, but with the Third Circuit now the first appeals court on record (2-1, for Kalshi), the Ninth Circuit expected to rule against, the CFTC actively suing states in federal court, and tribal nations opening a separate front under the Indian Gaming Regulatory Act, the split is likely to become definitive within the next six to twelve months.
The legislative angle
Congress is also engaged. On 23 March 2026, Senators John Curtis (R-Utah) and Adam Schiff (D-California) introduced the Prediction Markets Are Gambling Act. The bill would amend federal law so that sports and casino-style event contracts may not be offered on CFTC-regulated platforms. It is bipartisan, which makes it more viable than most legislation, though "viable" in the current Congress is a low bar, and the bill would still need to clear the usual committee and floor hurdles.
If the bill passes, the state-preemption question becomes moot for sports and casino contracts, the CFTC would no longer have jurisdiction, so there would be nothing to preempt. Kalshi and Polymarket US would lose the ability to offer those categories nationally. Non-sports contracts (economics, politics, entertainment, weather) would remain.
Handicapping legislation in a politically-divided Congress is unreliable. The more likely scenario is that the bill does not pass, the Supreme Court takes the preemption question, and we get a definitive federal-versus-state answer within 18 months. The direction of that answer will do more to shape the US prediction-markets industry than anything else happening right now.
What this means for you
If you are in one of the roughly 40 states with no active challenge, the practical answer is that Kalshi is available and legal for you today. Fund an account, trade, pay federal tax on your winnings as ordinary income (prediction-market winnings are taxed as short-term capital gains or ordinary income depending on structure, consult an accountant). If you are in a state with active litigation or enforcement, your access to sports-related contracts specifically may be restricted while the legal situation develops. Non-sports contracts are less affected in most of these states.
If you are planning to hold significant positions or trade at institutional scale, the legal uncertainty is a genuine risk factor. A ruling against federal preemption could force platforms to license state-by-state, which would reduce market depth and potentially strand positions held by users in affected states. This is low-probability but high-impact. Size positions accordingly.
If you are in a state where Kalshi has restricted access pending litigation, your options are limited. Polymarket US, now open to US signup after the May 2026 waitlist removal, does not solve the state-regulation problem, it operates under the same federal and state framework as Kalshi. Kalshi and Polymarket offshore are not legal options for US residents. Waiting for the Supreme Court question to resolve is, realistically, the plan.
For context on how the UK handles the same underlying products through a completely different regulatory lens, see our guide to whether prediction markets are legal in the UK. For a comparison of the two main US platforms, see Polymarket vs Kalshi.
How iPredicta fits in
iPredicta tracks prediction-market availability by jurisdiction. When a state changes its position on Kalshi, when a federal court rules on preemption, when the CFTC issues new guidance, when Polymarket US expands its rollout, these are the changes that materially affect which platforms you can use. We make that picture continuously current so you do not have to follow six different court dockets to know whether you can still trade.
The US prediction-markets regulatory landscape is among the fastest-moving in regulated finance right now. We cover it so you can focus on the markets themselves.
Frequently asked questions
Are prediction markets legal in the US?
Yes at the federal level. CFTC-designated platforms including Kalshi, Polymarket US, Robinhood event contracts, and Crypto.com all operate legally under the Commodity Exchange Act. The complication is state-level: by mid-2026 roughly a dozen states had mounted enforcement actions or litigation, including Nevada, Massachusetts, Tennessee, Ohio, New Jersey, Arizona, Connecticut, Illinois, New York, and Wisconsin, with Minnesota passing the first outright ban (effective 1 August 2026). The CFTC has counter-sued several states in federal court, tribal nations have opened a separate challenge under the Indian Gaming Regulatory Act, court rulings have split, and the question is heading for the Supreme Court. Kalshi is currently restricted in some states pending litigation. For most users in most states, prediction markets are accessible.
Is Kalshi legal in my state?
Kalshi is available in around 44 states as of mid-2026, with sign-up or sports contracts restricted in the active-enforcement states. Those states now include Nevada (state-court injunction on sports contracts), Massachusetts (heading for the state Supreme Judicial Court after mixed lower-court rulings), Ohio (lost a preliminary-injunction motion, with a state commission fine reported), Arizona (criminal charges, though the CFTC won a court order blocking prosecution), plus Connecticut, Illinois, New York, and Wisconsin (where the CFTC is suing the state). Tennessee and New Jersey are currently protected by injunctions Kalshi won. Minnesota has passed an outright ban set to take effect 1 August 2026 unless courts intervene. Always check Kalshi's own state-availability page before signing up, the picture changes as cases progress.
Is Polymarket legal in the US?
Yes, federally. Polymarket acquired QCEX, a CFTC-licensed exchange, in July 2025 for $112 million, and the CFTC issued an Amended Order of Designation in November 2025. The US product launched in beta in January 2026 behind an invite waitlist; in May 2026 Polymarket dropped the waitlist and opened general US signup (iOS-led, 18+), though it remains sports-led for now. The offshore Polymarket platform that processed billions in 2024 election volume is not the same product and is not legally accessible to US residents, attempting to access it violates the Terms of Use.
What is the federal preemption argument for prediction markets?
Kalshi argues the Commodity Exchange Act gives the CFTC exclusive jurisdiction over transactions on designated contract markets, which preempts state gambling laws. State regulators counter that preemption is narrower, states retain police-power authority to regulate gambling regardless of federal designation. The Third Circuit sided with Kalshi in April 2026. The Ninth Circuit's Nevada ruling is expected to create a circuit split, likely sending the question to the Supreme Court within 12 to 18 months.
Are prediction market winnings taxed in the US?
Yes. Prediction market winnings are taxable income in the US. The treatment depends on structure, short-term capital gains or ordinary income for most retail traders, depending on how the platform reports. Platforms are expected to issue 1099 forms for significant winnings. Consult a tax accountant familiar with derivatives or event-contract income for your specific situation.