Originally published in April 2026. Updated August 26, 2026, to reflect the Third Circuit decision, rulings in Washington, Utah, and Connecticut, current CFTC action, and the widening split among sports leagues.
TL;DR
The first major rulings in the fight over sports prediction markets now point in different directions. On April 6, 2026, a divided federal appeals court protected Kalshi from New Jersey enforcement, finding that the company had a reasonable chance of proving its sports contracts fall within the Commodity Futures Trading Commission’s exclusive jurisdiction. Courts in Washington, Utah, and Connecticut later preserved state authority to enforce gambling laws. Washington imposed the most immediate consequence: a September 2 deadline for stronger geofencing, with potential penalties of up to $120,000 per day for noncompliance. The legal question remains open, and access is becoming more state-specific while the appeals continue.
This article follows the legal fight. For the larger industry story, including market growth, technology, and business opportunities, read The Future of Sports Betting.
The Legal Scoreboard as of August 2026
When this article first appeared in April, the most important cases were still developing. Four rulings now show how differently courts are reading the same federal law.
New Jersey: Kalshi’s strongest win
On April 6, a divided Third Circuit panel affirmed a preliminary injunction protecting Kalshi from New Jersey enforcement. The majority found that Kalshi had a reasonable chance of proving its sports event contracts are swaps under the Commodity Exchange Act and therefore subject to the CFTC’s exclusive jurisdiction.
That ruling matters beyond New Jersey, but it did not settle the issue nationwide. It came at the preliminary-injunction stage, the panel divided 2-1, and courts outside the Third Circuit have since rejected its reasoning.
Washington: a deadline with operational consequences
Washington won a preliminary injunction in King County Superior Court after Judge John McHale found that Kalshi likely violated the Washington Gambling Act and Consumer Protection Act. An amended order requires Kalshi to block Washington users from sports and several other event-contract categories. The Washington attorney general’s office says Kalshi had to implement initial IP-address and residency controls by August 19 and must add multi-source geofencing by September 2.
Failure to complete the stronger geofencing could expose Kalshi to penalties of up to $120,000 per day. The amount is not automatic. The order allows Kalshi to explain a delay under oath, after which the court can determine whether penalties are appropriate. A state appeals court declined to pause the injunction while Kalshi appeals.
Utah: a ruling on the merits
Utah produced the most definitive state victory so far. On August 4, U.S. District Judge Robert Shelby entered summary judgment for Utah, holding that the Commodity Exchange Act does not prevent the state from enforcing its anti-gambling laws against Kalshi.
The court rejected Kalshi’s argument that excluding residents of one state would make compliance with federal exchange rules impossible. Kalshi appealed to the Tenth Circuit the next day.
Connecticut: another federal court rejects Kalshi’s position
A Connecticut federal judge denied Kalshi’s request for a preliminary injunction in an order entered August 10. The court concluded that Kalshi had not shown its sports contracts qualify as swaps under the relevant statutory language. It also found that federal law would not displace Connecticut’s traditional authority over sports wagering even if the contracts were swaps.
Kalshi appealed to the Second Circuit. As of August 26, the public appellate docket did not show that the company had received a stay protecting it from Connecticut enforcement.
How the Conflict Started
Kalshi offers contracts whose value depends on the outcome of future events, including sports. Robinhood distributes sports event contracts inside the same app customers use for stocks, options, and cryptocurrency. That distribution strategy helped turn a specialized derivatives product into a direct competitor to state-licensed sportsbooks. Our analysis of Robinhood’s sports prediction-market strategy explains how the product reached a much larger consumer audience.
The legal argument begins with classification. Traditional sportsbooks set odds and take wagers under state gaming licenses. Prediction-market customers buy and sell contracts through exchanges regulated by the CFTC. Kalshi argues that contracts traded on its federally designated market are derivatives under federal law, leaving no room for states to apply their gambling rules.
States see the same product differently. Customers risk money on sports outcomes, and regulators argue that calling the transaction a contract does not remove it from state gambling law. Their objections also involve licensing, minimum-age rules, college-sports restrictions, taxes, responsible-gambling systems, and tribal gaming rights.
The federal exchange model originally promised distribution beyond the state-by-state sportsbook map. That promise is now qualified. Robinhood’s current support materials say sports contracts are unavailable or restricted in certain states, and court orders can change access again. “Available nationwide” is no longer a reliable description of the consumer experience.
The CFTC Is Defending Its Role
Kalshi and Polymarket US operate federally registered designated contract markets. Registration establishes CFTC oversight, including market surveillance and rules against improper trading. It does not answer the separate preemption question now dividing courts.
The agency is actively defending its jurisdiction. On August 11, the CFTC said it had filed federal actions against nine states and invoked emergency authority in a separate New York dispute to support continued operation under the Commodity Exchange Act.
Federal policy is still being written. The CFTC withdrew an earlier event-contract proposal in February and opened a new rulemaking process in March. As of August 26, that process remained at the advance-notice stage, without a final prediction-market rule.
Congress is examining insider access as well. Representative Ritchie Torres introduced the Public Integrity in Financial Prediction Markets Act of 2026, which would restrict covered federal officials and employees from trading prediction-market contracts when they possess or could obtain material nonpublic information. The bill remains a proposal, not current law.
Sports Leagues Are Taking Different Sides
The NHL has made prediction markets part of its commercial strategy. Since October 2025, Kalshi and Polymarket have been official NHL prediction-market partners, with access to league data, marks, and broadcast exposure.
The NFL has taken a more restrictive position. It applies its gambling policy to prediction markets. Players cannot trade NFL-related contracts, and other league and team personnel face broader betting prohibitions. In March 2026, the league also asked operators to avoid markets involving information that could be known or manipulated in advance, including injuries, officiating, draft selections, and coaching decisions.
College sports leaders want additional limits. In January, the NCAA asked the CFTC to pause college-sports prediction markets until rules address age restrictions, advertising, prop markets, harassment, integrity monitoring, and harm reduction. Major League Soccer provided a different warning in March when it issued lifetime suspensions to Derrick Jones and Yaw Yeboah for gambling on league matches, including their own teams.
That split tells sports businesses why the court cases matter. One league views prediction markets as a sponsorship and engagement category. Another sees integrity risks that existing exchange rules may not fully address. The legal classification will influence which approach becomes easier for teams, leagues, media companies, and athletes to follow.
The Contrast With a Settled Market
The UK is a useful point of comparison. It is a mature market where leading UK betting apps compete on product quality rather than regulatory arbitrage: app speed, in-play depth, live streaming, and the clarity of promotional terms are real differentiators. That kind of competitive clarity is harder to find in the US prediction market space, where the regulatory picture is still too unsettled for meaningful product comparisons.
The UK Gambling Commission is not a perfect regulator. Critics have long argued enforcement moves too slowly. It does, however, provide a consistent baseline on customer safety, bonus transparency, and responsible-gambling tools that the US prediction-market space currently lacks.
Why the Business Model Is Worth Fighting Over
The state-regulated U.S. market is already large. Commercial sportsbooks generated a record $16.96 billion in revenue from $166.94 billion in wagers during 2025. Those operators compete state by state, with different licenses, tax rates, approved products, and consumer-protection requirements.
Prediction markets use a different structure. Customers trade with other market participants, while the exchange collects fees. Where the federal model survives state challenges, an exchange can reach customers without rebuilding the traditional sportsbook structure in every jurisdiction.
That possible distribution advantage has drawn companies from both finance and sports betting. It also explains why states, tribes, licensed operators, and federal regulators are unwilling to treat these cases as a narrow dispute over terminology. The rulings will affect market access, compliance costs, tax revenue, and the competitive value of licenses that sportsbook operators spent years obtaining.
For more on the traditional system prediction markets are challenging, see how sportsbooks set lines and build in their margin.
What Happens Next
The immediate date is September 2, when Washington’s multi-source geofencing requirement takes effect. The longer legal calendar includes Kalshi’s Washington state appeal and three federal appellate paths. The Third Circuit has ruled for Kalshi, while the Utah and Connecticut cases are moving into the Tenth and Second Circuits.
The cases could still produce a clearer consensus. They could also deepen the split. Supreme Court review becomes more plausible if federal appeals courts reach incompatible answers about the same provisions of the Commodity Exchange Act, but no Supreme Court petition has been granted and no nationwide resolution is scheduled.
Businesses should therefore treat access, compliance, and partnership decisions as jurisdiction-specific. Federal registration remains central to the model, while state enforcement is now producing real operating restrictions.
FAQ
Did Kalshi win or lose its 2026 court cases?
Both. A divided Third Circuit protected Kalshi from New Jersey enforcement at the preliminary-injunction stage. Washington imposed a preliminary injunction on Kalshi, Connecticut denied Kalshi’s request for one, and a federal court in Utah entered summary judgment allowing state gambling enforcement. Appeals are continuing.
What does Washington’s September 2 deadline require?
Kalshi must implement multi-source geofencing that blocks Washington users from sports and several other event-contract categories. Noncompliance could expose the company to penalties of up to $120,000 per day, subject to the order’s affidavit and court-review process.
Are sports prediction markets available in every state?
No single answer now applies nationwide. The exchanges operate under federal CFTC registration, but court orders and platform restrictions have limited access in some states. Availability can depend on the platform, contract, and user’s jurisdiction.
Are prediction markets regulated like sportsbooks?
No. State gaming regulators oversee licensed sportsbooks. The CFTC oversees federally designated contract markets. The lawsuits concern whether federal commodities law prevents states from applying their gambling laws to sports event contracts offered on those exchanges.
Will the Supreme Court decide the issue?
Possibly, but not yet. Supreme Court review would become more likely if federal appellate courts adopt conflicting interpretations. As of August 26, 2026, no Supreme Court case had been accepted.
Related Reading
- The Future of Sports Betting
- The Robinhood Sports Betting Strategy
- The California Sports Betting Standoff
- Sports Betting on College Campuses | A Storm Is Brewing
- Sports Betting Addiction Is on the Rise
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Eric Kasimov is the founder of SportsEpreneur, part of the KazSource media network. Since launching the platform in 2015, he has hosted over 500 podcast episodes, written and published more than 1,500 articles, and advised business leaders, founders, and creators on building authority through media strategy.
Through his brands — KazSource, KazCM, SportsEpreneur, and QuietLoud Studios — Eric leads teams that produce podcasts, develop brand platforms, and help companies grow through modern content ecosystems. He also scaled KazSource Insurance into a seven-figure boutique agency, providing the foundation for the broader media network he operates today.
His work has been featured in Forbes, Axios, and Front Office Sports, and his podcasts have included conversations with top founders, investors, and athletes turned entrepreneurs.