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State lawmakers are stepping up their challenge to online prediction markets, arguing that platforms such as Kalshi and Polymarket are operating too much like unregulated sportsbooks.
That clash was on display at a National Conference of State Legislatures summit in Chicago, where lawmakers, regulators, tribal gaming representatives and industry executives debated who should oversee these products. Prediction market companies say they offer event contracts under federal commodities law. States say the platforms are creating a backdoor around gambling rules, especially in sports.
Iowa Republican state Sen. Dan Dawson said the issue has already reached underage users in his state, pointing to high school students who had enrolled in Kalshi to bet on World Cup matches. In Iowa, the legal age for online sports betting is 21. Dawson also said a legislative subcommittee struggled to get basic information from prediction market operators about their activity in the state.
Kalshi has pushed back on state enforcement efforts. The company sued Iowa Attorney General Brenna Bird in March to block action against it, while maintaining that its exchange is regulated by the Commodity Futures Trading Commission. Kalshi representative Sara Slane said the company supports anti-money-laundering controls and self-exclusion tools, and argued that a national standard makes more sense than a state-by-state approach.
Why states are concerned
The concerns raised in Chicago went beyond sports betting competition. State officials and other critics said prediction markets could create consumer-protection gaps, increase problem gambling risks and open the door to insider trading on event-based contracts.
A coalition of 44 state attorneys general has already written to the CFTC arguing that the agency does not have authority over sports-related event contracts. That federal question is drawing extra scrutiny because the five-member commission reportedly has four vacancies.
The debate is also spilling into government ethics and tribal gaming. Minnesota Gov. Tim Walz signed an executive order barring state employees from using inside information to bet on prediction markets, and at least eight states have adopted similar restrictions. Tribal gaming attorney Michael Hoenig said the products are a direct threat to tribal sovereignty and tribal control over gaming on tribal lands.
What players should watch
For players, the biggest unanswered question is whether prediction markets will ultimately be treated more like financial exchanges or like sports betting. More lawsuits and state-level restrictions appear likely, and former White House chief of staff Mick Mulvaney said he expects the dispute to reach the U.S. Supreme Court.
Until that is resolved, the rules around access, oversight and consumer protections may continue to vary depending on how states and federal regulators act next.
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Source: As reported by Kevin Hardy.
