What States Are Predictive Markets Legal? A State-by-State Guide
Predictive markets—also known as prediction markets—have rapidly evolved from academic curiosities to a major force in financial speculation, political forecasting, and sports betting in the United States. As platforms like Kalshi, PredictIt, Polymarket, FanDuel, DraftKings, and Robinhood enter the mainstream, questions about the legality of predictive markets have become central for investors, traders, sports fans, and policymakers alike. This article provides an exhaustive, SEO-optimized breakdown of the legal status of predictive markets in every U.S. state, analyzes the federal regulatory framework, details recent enforcement actions, and explores the future of prediction markets in America.
What Are Predictive Markets? Definition and Mechanics
Predictive markets are online platforms where participants trade contracts based on the outcomes of future events. These contracts—often binary options—pay out if a specific event occurs, such as the result of an election, a sports game, or an economic indicator. The price of each contract reflects the market’s collective estimate of the probability that the event will happen, aggregating the wisdom of crowds into actionable forecasts.
Unlike traditional gambling, predictive markets function more like financial exchanges. There is no central bookmaker setting odds; instead, prices are determined by supply and demand among users. Participants can buy or sell positions before settlement, and market prices serve as real-time probability signals. This structure incentivizes research and informed speculation, often resulting in forecasts that outperform expert polls or pundit predictions.
Key Features of Predictive Markets
- Event-Based Contracts: Users trade on outcomes of elections, sports, weather, economic data, and more.
- Binary Options: Most contracts pay out $1 if the event occurs, $0 if not; prices reflect probability.
- Peer-to-Peer Trading: No house or bookmaker; users trade directly with each other.
- Market Prices as Forecasts: Contract prices aggregate collective beliefs about event likelihood.
- Regulatory Structure: Platforms may operate under federal financial regulation or state gambling laws, depending on contract type and jurisdiction.
Predictive markets have demonstrated remarkable accuracy in forecasting elections and economic trends. The Iowa Electronic Markets, for example, have consistently outperformed traditional polling in predicting presidential outcomes. Blockchain technology has further enabled decentralized prediction markets, such as Polymarket and Augur, which use smart contracts for automated trading and settlement.
Federal Regulatory Framework: The Role of the CFTC
Commodity Futures Trading Commission (CFTC) Oversight
At the federal level, predictive markets are primarily regulated by the Commodity Futures Trading Commission (CFTC), which oversees derivatives markets—including futures, options, and swaps—under the Commodity Exchange Act (CEA). The CFTC’s jurisdiction covers event-based contracts that function as financial instruments, provided they are listed on a registered Designated Contract Market (DCM) or Swap Execution Facility (SEF).
CFTC Regulatory Pathways
- Designated Contract Market (DCM): Platforms like Kalshi and Railbird Exchange are registered as DCMs, allowing them to list event contracts under federal supervision.
- No-Action Letters: The CFTC may issue no-action letters granting temporary relief from certain regulatory requirements, as seen with PredictIt, Polymarket, Gemini Titan, and LedgerX.
- Academic Exemptions: The Iowa Electronic Markets and PredictIt operated under academic exemptions, with strict limits on contract size and participant numbers.
Recent CFTC Actions and Guidance
In December 2025, the CFTC issued a series of no-action letters to prediction market platforms, providing temporary relief from swap data reporting and record-keeping requirements. These letters do not constitute permanent exemptions but signal a more flexible regulatory approach, allowing platforms to innovate while maintaining core investor protections.
The CFTC has also announced public roundtables to gather input on sports-related event contracts and explore revisions to its regulatory framework. Acting Chair Caroline Pham has emphasized the need for balanced regulation that fosters innovation while protecting retail customers from fraud and abuse.
Federal-State Tensions
Despite federal oversight, states retain significant authority over gambling activities. The central legal debate is whether event contracts offered by federally regulated prediction markets should be classified as financial derivatives (subject to CFTC jurisdiction) or as gambling (subject to state law). This tension has led to a wave of state enforcement actions, lawsuits, and ongoing litigation.
Major Platforms and Industry Entrants
Kalshi
Kalshi is a CFTC-registered Designated Contract Market, offering event contracts on elections, economic indicators, weather, and sports. Kalshi’s legal status is at the center of federal-state disputes, with eight states issuing cease-and-desist orders and multiple lawsuits pending in federal courts.
PredictIt
PredictIt operated under a CFTC no-action letter as an academic project focused on political forecasting. After the CFTC revoked its exemption in 2022, PredictIt sued under the Administrative Procedures Act and ultimately secured a settlement allowing expanded operations and higher position limits.
Polymarket
Polymarket is a blockchain-based prediction market that initially operated without CFTC registration. In January 2022, the CFTC fined Polymarket $1.4 million and required it to wind down noncompliant markets. Polymarket has since restructured, acquired a licensed DCM, and received no-action relief to resume limited U.S. operations.
FanDuel, DraftKings, Robinhood, Fanatics, Coinbase
Traditional sports betting and fintech giants have entered the prediction market space, often partnering with CFTC-regulated exchanges or launching standalone platforms:
- FanDuel Predicts: Launched in five states (Alabama, Alaska, South Carolina, North Dakota, South Dakota) with CME Group as the exchange partner.
- DraftKings Predictions: Live in 38 states, offering sports and financial event contracts; sports contracts are restricted in states with existing sportsbooks.
- Robinhood: Offers prediction markets via Kalshi partnership; expanding into the UK and EU.
- Fanatics Markets: Operating in 24 states, including Washington.
- Coinbase: Suing Michigan, Illinois, and Connecticut over state crackdowns on prediction markets; plans to list Kalshi contracts.
State Enforcement Actions and Legal Battles
Cease-and-Desist Orders and Lawsuits
Since 2024, a growing number of states have taken legal action against prediction market platforms, particularly those offering sports event contracts. Enforcement actions include cease-and-desist letters, lawsuits, threats to operator licenses, and legislative bans.
States with Active Enforcement or Litigation
- Nevada: Cease-and-desist order against Kalshi; preliminary injunction granted, later dissolved; ongoing appeals.
- New Jersey: Cease-and-desist order; federal court granted preliminary injunction to Kalshi; state appealed to Third Circuit.
- Maryland: Cease-and-desist order; court denied Kalshi’s injunction, upholding state authority.
- Connecticut: Cease-and-desist orders to Kalshi, Robinhood, and Crypto.com; lawsuits pending; Coinbase joined legal battle.
- Massachusetts: Attorney General filed suit against Kalshi; hearing held in December 2025.
- New York: Cease-and-desist order to Kalshi; lawsuit filed; legislative bill introduced to regulate prediction markets.
- Illinois, Arizona, Montana, Ohio: Cease-and-desist orders and threats to operator licenses; lawsuits and investigations ongoing.
- Washington, Louisiana: Publicly declared prediction markets illegal; monitoring ongoing litigation.
- Arkansas: Attorney General issued opinion declaring prediction markets illegal gambling.
Tribal and League Opposition
Native American tribes and sports leagues have filed lawsuits and amicus briefs, arguing that prediction markets infringe on tribal sovereignty, violate the Indian Gaming Regulatory Act (IGRA), and undermine integrity frameworks. The NFL and tribal governments have called on Congress to clarify the legal boundaries and enforce existing bans.
State-by-State Legal Status Table
Below is a comprehensive table summarizing the current legal status of predictive markets in each U.S. state as of December 2025. The table includes notes on enforcement actions, litigation, and regulatory frameworks.
| State | Status | Notes |
|---|---|---|
| Alabama | Legal | FanDuel Predicts, DraftKings live; no active enforcement |
| Alaska | Legal | FanDuel Predicts, DraftKings live; no active enforcement |
| Arizona | Restricted | Cease-and-desist to Kalshi; threats to operator licenses; monitoring ongoing |
| Arkansas | Banned | AG opinion: prediction markets are illegal gambling |
| California | Legal | DraftKings live; no active enforcement; tribal gaming opposition |
| Colorado | Legal | DraftKings live; no active enforcement |
| Connecticut | Banned | Cease-and-desist to Kalshi, Robinhood, Crypto.com; lawsuits pending; Coinbase suing state |
| Delaware | Legal | DraftKings live; no active enforcement |
| District of Columbia | Legal | DraftKings live; no active enforcement |
| Florida | Legal | DraftKings live; no active enforcement |
| Georgia | Legal | DraftKings live; no active enforcement |
| Hawaii | Banned | All gambling prohibited |
| Idaho | Legal | DraftKings live; no active enforcement |
| Illinois | Restricted | Cease-and-desist to Kalshi; threats to operator licenses; lawsuits pending |
| Indiana | Legal | DraftKings live; no active enforcement |
| Iowa | Legal | Iowa Electronic Markets academic exemption; DraftKings live |
| Kansas | Legal | DraftKings live; no active enforcement |
| Kentucky | Legal | DraftKings live; no active enforcement |
| Louisiana | Banned | LGCB letter: prediction markets are illegal gambling; threats to operator licenses |
| Maine | Legal | DraftKings live; no active enforcement |
| Maryland | Restricted | Cease-and-desist to Kalshi; court upheld state authority; litigation ongoing |
| Massachusetts | Restricted | AG lawsuit against Kalshi; hearing held; threats to operator licenses |
| Michigan | Restricted | Coinbase suing state over crackdown; threats to operator licenses |
| Minnesota | Legal | DraftKings live; no active enforcement |
| Mississippi | Legal | DraftKings live; no active enforcement |
| Missouri | Legal | DraftKings live; no active enforcement |
| Montana | Restricted | Cease-and-desist to Kalshi; monitoring ongoing |
| Nebraska | Legal | DraftKings live; no active enforcement |
| Nevada | Restricted | Cease-and-desist to Kalshi; preliminary injunction dissolved; appeals ongoing |
| New Hampshire | Legal | DraftKings live; no active enforcement |
| New Jersey | Restricted | Cease-and-desist to Kalshi; federal injunction granted; state appeal pending |
| New Mexico | Legal | DraftKings live; no active enforcement |
| New York | Restricted | Cease-and-desist to Kalshi; lawsuit filed; legislative bill introduced |
| North Carolina | Legal | DraftKings live; no active enforcement |
| North Dakota | Legal | FanDuel Predicts, DraftKings live; no active enforcement |
| Ohio | Restricted | Cease-and-desist to Kalshi; threats to operator licenses; lawsuits pending |
| Oklahoma | Legal | DraftKings live; no active enforcement |
| Oregon | Legal | DraftKings live; no active enforcement |
| Pennsylvania | Legal | DraftKings live; gaming board expressed concerns; no enforcement |
| Rhode Island | Legal | DraftKings live; no active enforcement |
| South Carolina | Legal | FanDuel Predicts, DraftKings live; no active enforcement |
| South Dakota | Legal | FanDuel Predicts, DraftKings live; no active enforcement |
| Tennessee | Legal | DraftKings live; no active enforcement |
| Texas | Legal | DraftKings live; no active enforcement |
| Utah | Banned | All gambling prohibited |
| Vermont | Legal | DraftKings live; no active enforcement |
| Virginia | Legal | DraftKings live; no active enforcement |
| Washington | Banned | Gambling Commission: prediction markets unauthorized; monitoring ongoing litigation |
| West Virginia | Legal | DraftKings live; no active enforcement |
| Wisconsin | Legal | DraftKings live; tribal lawsuit against Kalshi pending |
| Wyoming | Legal | DraftKings live; no active enforcement |
Table Methodology and Analysis
This table synthesizes data from regulatory filings, court cases, press releases, and industry news as of December 2025. “Legal” indicates that prediction markets are available and no active enforcement is underway. “Restricted” denotes states with cease-and-desist orders, lawsuits, or threats to operator licenses. “Banned” applies to states with explicit prohibitions, AG opinions, or tribal gaming exclusivity. Litigation and regulatory actions are fluid; users should verify the latest status before participating.
Analysis of the Evolving Legal Landscape
Federal Preemption vs. State Authority
The core legal battle centers on whether federal CFTC regulation preempts state gambling laws for event contracts. Courts have split on this issue:
- Nevada and New Jersey: Federal courts granted preliminary injunctions to Kalshi, finding likely federal preemption.
- Maryland: Court denied Kalshi’s injunction, upholding state authority over gambling.
- Connecticut, Illinois, Arizona, Montana, Ohio, Massachusetts, New York: Active enforcement and litigation; outcomes pending.
The Supreme Court may ultimately decide the issue, with circuit splits and appeals likely in 2026.
Industry Coalitions and Partnerships
Prediction market platforms have formed coalitions to advocate for federal regulation and challenge state actions. The Coalition for Prediction Markets includes Kalshi, Crypto.com, Robinhood, Coinbase, and Underdog. Major sports betting and fintech companies—FanDuel, DraftKings, Fanatics, Robinhood, Coinbase—have launched prediction market products, often partnering with CFTC-regulated exchanges.
Tribal and League Opposition
Tribal governments and sports leagues argue that prediction markets undermine negotiated compacts, revenue frameworks, and integrity systems. The Indian Gaming Association and NFL have called on Congress to clarify the law and protect tribal sovereignty and sports integrity.
Consumer Protection and Responsible Gaming
State regulators emphasize the need for age verification, responsible gaming tools, exclusion lists, and consumer protection parity with sportsbooks. Prediction markets are not uniformly subject to these safeguards, driving enforcement actions around underage access and integrity controls.
Taxation and Revenue Implications
States argue that prediction markets create tax leakage and undermine licensed sportsbook revenue. Platforms operating under federal regulation may avoid state taxes, intensifying opposition in high-tax jurisdictions.
Pending Legislation and Court Cases
Several states have introduced bills to regulate or ban prediction markets. New York Assembly Bill 9521 seeks to establish a licensing framework. Multiple federal and state court cases are pending, with appeals likely to reach the Supreme Court.
Comparative International Regulatory Approaches
Internationally, most jurisdictions classify sports outcome contracts as gambling, not financial derivatives. The UK allows political betting under gambling regulation but prohibits Kalshi-style event-contract exchanges. Crypto-native prediction markets face restrictions due to anti-money laundering and advertising rules.
Practical Guidance for Users in Each State
How to Participate Legally
- Check Platform Regulatory Status: Use platforms registered as DCMs or operating under CFTC no-action relief.
- Verify State Restrictions: Consult state gaming commission websites and recent enforcement actions.
- Understand Contract Types: Political, economic, and climate contracts face fewer obstacles than sports event contracts.
- Monitor Litigation Outcomes: Court rulings may change legal status; appeals are ongoing in multiple states.
- Practice Responsible Gaming: Use platforms with age verification, exclusion lists, and responsible gaming tools.
Risks and Considerations
- Legal Uncertainty: Participation in restricted states may expose users to penalties or blocked access.
- Taxation: Gains may be subject to state gaming taxes or federal reporting requirements, depending on classification.
- Consumer Protection: Not all platforms offer sportsbook-level safeguards; verify platform policies.
Future Outlook: The Path Ahead for Predictive Markets Legal Status
Regulatory Trends
The legal environment for predictive markets is rapidly evolving. The trend is toward normalization and federal oversight, with the CFTC adopting a more flexible approach and major industry players entering the space. However, state-federal conflicts persist, especially around sports event contracts.
Potential Scenarios
- Federal Preemption: Courts may rule that CFTC regulation preempts state gambling laws for event contracts, enabling nationwide operation.
- State Regulation: States may update laws to explicitly ban or license prediction markets, requiring compliance with local gaming rules.
- Congressional Action: Lawmakers may clarify the Commodity Exchange Act or enact new legislation to define the boundaries of prediction markets.
- Industry Self-Regulation: Platforms may adopt best practices for consumer protection, transparency, and responsible gaming to reduce risk and gain legitimacy.
Industry Growth
With PredictIt, Kalshi, Polymarket, FanDuel, DraftKings, Robinhood, Fanatics, and Coinbase all expanding, prediction markets are poised for exponential growth. Trading volumes have reached billions of dollars monthly, and institutional adoption is accelerating.
Challenges and Opportunities
- Legal Clarity: The outcome of ongoing litigation and potential Supreme Court review will determine the future of prediction markets legal status.
- Consumer Protection: Enhanced safeguards and responsible gaming measures will be essential for industry sustainability.
- Taxation and Revenue: States will seek to capture revenue from prediction markets, influencing regulatory approaches.
- Innovation: AI-driven analytics, blockchain technology, and new contract types will drive product innovation and market expansion.
Conclusion
The question “What states are predictive markets legal?” is complex and dynamic. Most U.S. states allow predictive markets under federal CFTC regulation, but sports event contracts face significant state-level challenges, enforcement actions, and ongoing litigation. Eight states have taken direct legal action against platforms like Kalshi, PredictIt, and Polymarket, while tribal governments and sports leagues are pressing Congress for clarity.
The legal landscape is evolving rapidly, with federal regulators, courts, and lawmakers shaping the future of prediction markets. Users should stay informed, verify platform compliance, and monitor state-specific restrictions. As regulation matures, predictive markets are likely to become a standard part of the U.S. financial and forecasting ecosystem, offering innovative ways to speculate on real-world events.
For the latest updates on predictive markets legal status, consult authoritative sources, regulatory filings, and court rulings. The future promises both opportunity and uncertainty, but one thing is clear: prediction markets are here to stay.