Many states are trying to crack down on the newest frontier in the financial wild west: prediction markets. Although best known as places for betting on sports, which the Supreme Court ruled is legal during President Donald Trump’s first term, these platforms have ballooned in usage in the past year with users betting on all manner of topics from presidential elections to warfare. The conflicts of interest and questionably moral options to bet on the misfortune of others has prompted many states to try and rein these platforms in.
But the Commodity Futures Trading Commission, an independent federal agency that regulates the United States derivatives markets, is not a fan. In 2026, the CFTC sued Illinois, New York, Arizona, Connecticut and, most recently, Minnesota for efforts to restrict or ban prediction markets.
On Monday, Minnesota Gov. Tim Walz signed a total ban on futures trading platforms like Kalshi and Polymarket. The Trump administration filed a lawsuit Tuesday to prevent the ban from going into place on Aug. 1, with the CFTC arguing its authority supersedes the state’s ability to regulate futures trading. Notably, Trump’s son Donald Trump Jr. is a strategic advisor for Kalshi and has invested in Polymarket through his venture capital firm.
Regardless, the cash flow to prediction markets is enormous and growing fast. In early 2025, monthly trading averaged around $1.2 billion — less than two years later, current monthly trades amount to over $20 billion.
At least 15 states introduced legislation in 2026 attempting to regulate prediction markets, with many attempting to use their authority over gambling and sports betting to regulate events contracts platforms, which many argue dip into both categories.
“This bipartisan law stops companies like Kalshi and Polymarket from offering bets in Minnesota on the outcome of events like sports, wars and political outcomes under the guise of ‘prediction markets,’” Minnesota State Rep. Emma Greenman told Salon.
Greenman, who introduced the legislation, said that the state “has had the authority to regulate gaming and gambling since we were a territory.” The state’s attorney general, Keith Ellison, also believes the state was within their rights to ban prediction markets, saying he was very concerned about their impact on Minnesotans.
“Prediction markets are designed to be addictive and prey especially on young people and low-income folks.”
“Prediction markets are designed to be addictive and prey especially on young people and low-income folks. They help the ultra-rich get richer and the rest of us get poorer,” Ellison said in a statement to Salon. “My office and I are reviewing this lawsuit and will respond in court.”
Betting on the future through what is referred to as events contracts was not always considered gambling in the same way it seems now with platforms like Kalshi and Polymarket. Yesha Yadav, a law professor at Vanderbilt University Law School, explained that prediction markets used to be much more similar to opinion polling than gambling.
“Opinion polls are people kind of giving their off the cuff thoughts, but this is about people putting a little bit of money on the line,” Yadav told Salon. “You’re putting money on the outcome of potential events happening or you’re betting on certain probabilities with respect to future events.”
Prior to Kalshi and Polymarket’s exploding popularity, futures trading was a niche financial tool used in universities for experiments and specific industry actors. Now, anyone can bet on the outcome of anything.
“What these guys have done is do the thing that prediction markets before have not done well, which is bring the masses to the market,” she said.
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These online platforms argue they are not like traditional gambling and sports betting outfits because there is no house or sportsbook to bet against. Instead, prediction markets are driven purely by participants. Nevertheless, many states don’t buy that this distinction matters, especially when it comes to things like sports predictions.
“State regulators are becoming very upset with this because they regard as sports betting as their domain, so there’s a very significant kind of controversy at present, which is that the state regulators are really pushing back hard against the CFTC’s jurisdiction,” Yadav said.
“It has only been in the last year that the CFTC has changed its position, usurping established state authority and exceeding its authority to green light this perversion of commodity futures markets to be used by gambling platforms to evade the rightful gambling regulatory structures, which we and other state governments have created through careful and time-honored policymaking,” Greenman said.
“Minnesota’s ban runs counter to the federal government’s established framework for regulating prediction markets as evidenced by the lawsuit from the CFTC against Minnesota to defend their exclusive jurisdiction over these markets,” a spokeperson from Polymarket said in a statement to Salon.
How well the CTFC enforces its jurisdiction is under fire lately. Figures from within the Trump administration have attracted scrutiny for suspiciously timed bets on major events, such as in the ongoing Iran war. In February, Gannon Ken Van Dyke, a U.S. army soldier, placed a $400k bet on the expulsion of former Venezuelan President Nicolás Maduro using inside information. Now he is being charged with using classified info to make a profit. Even beyond government inside trading on these platforms, other bets are being orchestrated by insiders. A video editor for MrBeast, the most subscribed to creator on Youtube, was recently suspended by Kalshi for “near-perfect trading success on markets with low odds” related to MrBeast videos.
While Kalshi has ramped up internal investigations in the last few months, most of the riskiest trades seem to happen on Polymarket, which uses blockchain technology and cryptocurrency to run its bets making finances and identity hard, if not impossible to trace. On top of that, it was banned for U.S. users in 2022 under the Biden administration. Although it now has a U.S. version regulated by the CFTC, the international original version is where most betting still takes place. Most U.S. users utilize virtual private networks that mask their location to access the entire platform.
“The truth is that the CFTC does not have the experience, expertise, personnel, technology or budget to police gambling in all 50 states, or to protect consumers and minors from the dangers of gambling,” Greenman said. “We should not allow these shadowy prediction gambling companies to evade the established and experienced state gambling regulation and enforcement structures.”
The Trump-led CFTC disagrees, arguing its authority to regulate prediction markets overrules various state regulation attempts. “This Minnesota law turns lawful operators and participants in prediction markets into felons overnight,” CFTC Chairman Michael S. Selig said in a statement.
“Minnesota banning prediction markets is like trying to ban the New York Stock Exchange,” Kalshi representative Elizabeth Diana said. “States can’t ban federally regulated exchanges because doing so is a blatant violation of the constitution and federal law (and a giant waste of taxpayer resources and everyone’s time).”
Diana also noted a ban in the state might drive activity offshore and completely out of the CFTC’s authority.
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