Prediction market lawsuits: Kalshi, Polymarket, the CFTC and the states

The short version

• One legal question runs through almost every case: does the Commodity Exchange Act, as amended by the 2010 Dodd-Frank Act, give the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over event contracts on a registered exchange, and so push aside state gambling law?
• The appeals courts disagree. The Third Circuit holds the sports contracts are swaps and preempt state law; the Ninth Circuit holds they are not, and the Sixth Circuit, at the stay stage, doubted preemption too.
• New Jersey has asked the Supreme Court to settle it (Flaherty v. KalshiEX, No. 26-299). As of 30 October 2026 the response is due 7 December 2026 and the Court has not acted on the petition.
• The CFTC is not only defending. It has sued Utah (26 October 2026) and nine other states to assert federal jurisdiction over these markets.
• Separate tracks run alongside: state enforcement suits and consumer claims. For how a user actually resolves a dispute with a platform, see prediction market arbitration.^{1,8,9,10,11,14,15,20}

What is the fight over prediction markets about?

The fight over prediction markets is one classification question. If these are swaps traded on a CFTC-registered exchange, the federal regulator has control and state gambling law is pushed aside; if they are wagers, the states keep the power to license, tax and ban them. The Commodity Exchange Act gives the CFTC “exclusive jurisdiction” over swaps on a registered exchange (7 U.S.C. 2(a)(1)(A)). For the full set of dispute types and who decides each, see prediction market disputes.^1,14

Some plain terms first. A swap is a financial contract whose value turns on a future event or price; federal law places swaps under the CFTC rather than the states. An event contract is a binary “yes or no” contract that pays out on whether a stated event happens. A designated contract market (DCM) is an exchange the CFTC has licensed to list contracts for trading. Kalshi (KalshiEX LLC) has been a CFTC-designated DCM since 3 November 2020, and Polymarket’s US exchange runs through QCX LLC (d/b/a Polymarket US). A DCM self-certifies a contract and may list it without the Commission’s prior approval, a point the Ninth Circuit sets out in the Kalshi litigation.^6,9,14,17

Congress did set a limit. Under the “Special Rule” the CFTC may find an event contract “contrary to the public interest” where it involves activity unlawful under any Federal or State law, terrorism, assassination, war, gaming, or similar activity; no such contract “may be listed or made available for clearing or trading on or through a registered entity” (7 U.S.C. 7a-2(c)(5)(C)). The CFTC’s own rule carries this out and lets the Commission open a 90-day review and ask the exchange to suspend a contract while it looks (17 C.F.R. 40.11(a), (c)).^2,3

Sports set the fight off. Kalshi has promoted itself as “the first app for legal sports betting in all 50 states,” and in 2025 about 95% of its revenue came from sports-related trading (the figure is Kalshi’s, for 2025). Where a contract’s outcome is challenged rather than its legality, that is a different dispute: who decides how a market resolves.^9,11

Who is suing whom?

Four tracks of litigation run at once. There are federal preemption fights in both directions, with platforms suing state regulators and the United States and the CFTC suing states; state enforcement suits by attorneys general; a reported criminal track in Utah we have not been able to verify; and private consumer claims. The table below is the case map, as of 30 October 2026.^11,14,16,20

A fifth strand sits next door and is covered separately. The CFTC’s Division of Enforcement issued a prediction markets advisory on 25 February 2026, asserting its authority to police misuse of nonpublic information and fraud on event contracts, after two such matters were handled by Kalshi’s own internal enforcement program. That enforcement and market-abuse track is in prediction market insider trading.²³

New Jersey’s cert petition gives a sense of the scale. It counted “at least 39 lawsuits across 20 States,” and said the courts had issued over 20 decisions, splitting 18-4 against the Third Circuit’s approach (as of the September 2026 petition).¹¹

Some states have moved without yet suing. The Missouri Attorney General’s office ordered unlicensed prediction-market operators, Kalshi among them, to stop offering sports event contracts to Missourians unless they obtain a state licence within 30 days (letter dated 16 September 2026). Whether a platform is legal in a given state has no single answer yet: it turns on that state’s gambling law and on which court’s view of preemption governs there, the very thing the split leaves unsettled.^8,9,11,21

Which courts have ruled, and how?

The federal appeals courts disagree on whether sports event contracts are “swaps,” and that disagreement is why the case is at the Supreme Court. All of these are preliminary-injunction rulings on the likelihood of success, not final merits judgments. The split is set out below.¹¹

• Third Circuit, KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026), No. 25-1922, decided 6 April 2026, 2 to 1: Kalshi showed a reasonable chance of success that its sports event contracts are swaps traded on a CFTC-licensed DCM, so the Act “preempts otherwise applicable state law.” One judge dissented.
• Ninth Circuit, KalshiEX, LLC v. Assad, 2026 WL 2543846 (9th Cir. 28 August 2026), No. 25-7516, the Nevada appeal (Kalshi had sued the Nevada Gaming Control Board): Kalshi was not likely to succeed, because these contracts are “likely not swaps.” Reading these bets into “swap” would hide an “elephant in a mousehole,” and the 2010 Act “cannot be read as a direct (or indirect) regulation of sports gambling.” It expressly disagreed with the Third Circuit and created the split.
• Sixth Circuit, KalshiEX v. Schuler (Ohio), No. 26-3196: at the stay stage (24 April 2026) the court was “unconvinced” that preemption applies. Orgel (Tennessee) is the parallel Sixth Circuit appeal. A later merits ruling is reported but we have not read the Sixth Circuit opinion, so we do not state its holding.
• Maryland: a federal district court declined to enjoin the state’s regulators (Kalshi v. Martin, 793 F. Supp. 3d 667 (D. Md. 2025)). No Fourth Circuit decision is confirmed in the primary record, so we do not assert one.
• District and state courts divide 18-4, the majority rejecting the Third Circuit’s approach (as of the September 2026 petition).^8,9,11

Will the Supreme Court decide whether prediction markets are gambling?

Maybe. One petition is filed and pending, and the Court has not yet decided whether to hear it. Flaherty v. KalshiEX, No. 26-299, asks whether the 2010 Dodd-Frank Act “preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission.”^10,11

The procedural facts are all from the docket, as of 30 October 2026: the petition was filed on 2 September 2026 and docketed on 8 September; the time to respond was extended first to 9 November and then, by an order of 30 October 2026, to 7 December 2026. The Court has not acted on the petition.¹⁰

The outside parties the Court lets weigh in (amici) already on the docket show the stakes. Supporting the states are the National Football League, which told the Court its priority is preserving the integrity of its games; the American Gaming Association; Ohio with 38 other states and the District of Columbia; 145 Indian tribes and tribal organisations; the Cabazon Band of Cahuilla Indians; Stop Predatory Gambling and others; a former US Senator who co-authored the 2010 Act; and a former CFTC Chairman.^10,12,13

What each outcome would mean, as consequence rather than prediction: a grant sets up one national answer on whether these contracts are swaps; a denial leaves the split standing and the map patchwork, state by state; a long hold would keep operators in the current uncertainty while the circuit and state cases run on.^10,11

Why is the CFTC suing the states?

Because the federal regulator now uses preemption on the attack. Rather than wait to be sued, the CFTC sues a state to stop it enforcing its gambling laws against a CFTC-registered exchange. The fullest example we have read is United States and CFTC v. State of Utah, D. Utah No. 2:26-cv-01055, filed 26 October 2026: a Supremacy Clause claim (the constitutional rule that valid federal law overrides conflicting state law) seeking a declaration and an injunction that Utah’s gambling laws are preempted as applied to trades on CFTC-registered markets.¹⁴

The CFTC’s release of 27 October 2026 says it had sued Utah and begun proceedings against nine other states. Its complaint names them (paragraph 65): Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin, and records that preliminary injunctions had been entered for the federal side in Arizona, Illinois and Minnesota (as of the complaint, 26 October 2026).^14,15

Two rulemakings sit behind this as context, not as holdings. On 19 October 2026 the CFTC issued an interim final rule further defining “swap” to exclude casino-style gambling products (effective on publication, comments to 18 November 2026), alongside a proposed rule taking comment on including sports, political, cultural and weather event contracts. The complaint and the state suits do most of the day-to-day work; for the money and licensing side of this, see financial markets arbitration.^4,5,14

Did Utah bring criminal charges against Kalshi?

A criminal track has been reported, but we cannot confirm it. The charging document was not retrievable as of 30 October 2026 (the link returned a 404), and no other official court record was available, so we do not state that criminal charges were filed, name any defendant or rely on any reported count. Nothing here is a finding of guilt. The verified record is the civil suit, below.²⁰

On the civil side, Utah moved first. On 20 October 2026 the Utah Attorney General filed a civil action, Brown v. KalshiEX Inc., et al., Utah 3d Dist. Ct. No. 260908356, alleging that Kalshi lets Utah residents bet on sports, elections and other outcomes in breach of Utah’s gambling laws, and that the activity is a public nuisance. The complaint names the Kalshi entities and two market-maker entities and alleges conduct since at least September 2024. That state suit is what the United States and the CFTC then moved to stop.^14,20

Can prediction market users sue, or get their money back?

Users are suing, and getting money back is the aim, though it is not straightforward. The user-side claim is the consumer version of the states’ argument: that a platform runs an unlicensed, illegal sportsbook presented as a prediction market. The state complaints put that theory on the primary record, with the Kentucky suits pleading consumer-protection and loss-recovery claims and asking for restitution and disgorgement.^16,18,19

On private class actions we are careful. As of 30 October 2026 we have not verified individual consumer class-action dockets against the court record, so we do not name captions or counts here. The question a user actually cares about is whether a platform’s user agreement forces arbitration and waives class actions, which would reroute these claims. That is the companion page, prediction market arbitration, alongside NFA arbitration. For the forum itself, see arbitration in New York and, by contrast, FINRA arbitration. For where arbitration, complaints and AI sit across dispute resolution more generally, see AI in dispute resolution.¹⁶

How is this different from Kalshi’s 2024 election-contracts win?

The 2024 case was Kalshi against the federal regulator over election contracts; today’s fight is Kalshi against the states over sports contracts. The CFTC had blocked Kalshi’s congressional-control contracts under the Special Rule as gaming or election gambling. A district court vacated that decision, and on 2 October 2024 the D.C. Circuit denied the CFTC’s emergency motion for a stay (KalshiEX LLC v. CFTC, 119 F.4th 58), which left the district court’s vacatur in place, so Kalshi could list the contracts.⁷

Why it matters: that win let Kalshi keep its federally regulated event contracts over the CFTC’s objection, and it underpins Kalshi’s argument that the Act gives the CFTC exclusive jurisdiction, which it now runs against the states.^7,11

What happens next?

The calendar, as of 30 October 2026: Kalshi’s response opposing the petition is due 7 December 2026, so, on our reading of the schedule, the Court is unlikely to consider it before its January 2027 conferences. Meanwhile the circuit and state cases keep moving, and the CFTC’s preemption suits are pending across ten states.^10,15

Treat any single headline with care. The law here is moving week to week, and the news pieces that rank do not update after they are filed. The reliable facts are the dockets and the filings; this page is maintained against them.¹⁰

Beyond the lawsuits, what would make these disputes fairer and faster?

In our view, the fight is mainly about who writes the rulebook. Event contracts already trade under a self-certified exchange rulebook that the CFTC can put under review or bar if it crosses the Special Rule (7 U.S.C. 7a-2(c)(5)(C); 17 C.F.R. 40.11). The question before the Supreme Court is narrow: whether federal law preempts state gambling law for these contracts, which turns on whether they are swaps. Whichever way preemption lands, the disputes underneath it remain. The state complaints, the consumer claims they describe and the CFTC’s own enforcement all point to the same thing: many small, record-heavy disputes, each between one user and one platform, each turning on what the rulebook says and what the record shows. What makes that kind of dispute fair and fast is running every one the same way under those rules, with a named person deciding, any AI kept to reading and drafting, and a dated record each side can check and a court or regulator can later rely on. The courts divide 18-4 on classification; the process underneath is a separate problem, and it is the one that does not go away.^{2,3,10,11,16,23}