The Trump administration wants to block states from regulating prediction markets

The Trump administration says it will crack down on nascent state efforts to regulate prediction markets like Kalshi and Polymarket, which have faced a flurry of cease-and-desist letters and lawsuits in a growing number of states in the past year.

Commodity and Futures Trading Commission chair Michael Selig announced on Tuesday that the agency was filing a legal brief in a Nevada case upholding its authority to oversee prediction markets at the federal level.

"The CFTC has regulated these markets for over two decades," Selig said in the minute-long video posted on social media. "They provide useful functions for society by allowing everyday Americans to hedge commercial risks like increases in temperature and energy price spikes."

Selig added that the CFTC wants to ensure prediction markets are able to flourish in the U.S. "To those who seek to challenge our authority in this space, let me be clear, we will see you in court," he said.

The increasing popularity of prediction markets — where Americans bet on basically everything from the weather to interest rate decisions at the Federal Reserve — has prompted some states to take legal action against the betting platforms.

In Nevada, a federal judge in November blocked Kalshi from offering prediction contracts in the state following a lawsuit from the state's gambling regulators. It has since appealed the decision. Polymarket is similarly barred from providing events-based contracts in a separate Nevada case.

Sports gambling is legal in 39 states and Washington D.C. But Kalshi and Polymarket have argued bets made through their platforms are different from those made at a casino, so they should be exempt from complying with federal taxes and other regulations. Experts have described it as a loophole in gambling laws.

A January survey of 2,000 adults in the U.S. from personal finance site Nerdwallet indicated that 20% of Americans said they'd bet on a sporting event in the past year, a jump from 12% in late 2023. A separate research paper found that the introduction of online sports gambling is connected to lower credit scores and higher credit debt.

Democratic senators are alarmed at the prospect of the Trump administration green-lighting gambling through prediction markets with few strings attached.

Twenty-three Democratic senators sent a letter to the CFTC on Friday urging the CFTC to hold off intervening in pending litigation except in certain cases. The group also want the CFTC to reiterate that contracts involving sports-games, war, terrorism and assassination cannot be listed under federal law.