What are Kalshi and Polymarket?

Kalshi and Polymarket are prediction market platforms where users trade on the outcomes of future events such as elections, interest rates, sports and economic data. These platforms allow traders to buy and sell contracts tied to the probability of specific outcomes occurring.

Why are prediction markets facing legal pressure in the US?

US regulators are fighting over whether prediction markets should be regulated as financial exchanges or gambling businesses. Federal regulators argue they are legitimate financial products, while several states claim they are effectively unlicensed betting platforms.

Why does the CFTC support prediction markets?

The US Commodity Futures Trading Commission believes prediction markets can improve forecasting and help businesses hedge risks. Supporters argue these markets provide real-time data on economic expectations, political outcomes and financial events more efficiently than traditional surveys.

Why do some states call Kalshi and Polymarket gambling platforms?

Critics argue the majority of trading activity focuses on sports and politics rather than genuine financial hedging. Some state regulators believe prediction market operators are using financial terminology to avoid gambling taxes and state gaming laws.

How big is the prediction market industry now?

Prediction markets have grown rapidly into a sector generating more than $20 billion in monthly trading volume. Growth has accelerated due to retail speculation, political event trading and increasing institutional interest.

How are institutional investors getting involved in prediction markets?

Polymarket has formed partnerships linked to Nasdaq Private Market, the New York Stock Exchange, Yahoo Finance and Google. Supporters believe institutional liquidity could improve pricing accuracy and make prediction markets more useful for forecasting economic and corporate outcomes.

Why do supporters think prediction markets are useful?

Advocates argue prediction markets aggregate crowd intelligence and produce highly responsive forecasts. Supporters point to examples including Federal Reserve references to prediction market data and Ford’s internal forecasting systems outperforming expert projections.

Could the legal fight hurt Kalshi and Polymarket growth?

Yes, regulatory uncertainty could limit expansion and discourage institutional participation. If states successfully impose gambling restrictions or bans, market liquidity and adoption could weaken significantly.

Image for illustrative purposes only. Not a real photo.

Legal battle threatens Kalshi and Polymarket expansion

Written by Heidi Cuthbert Published May 22, 2026, 6:19 AM

Prediction markets including Kalshi and Polymarket are facing mounting legal uncertainty as US federal and state regulators clash over whether the platforms should be treated as financial exchanges or gambling operations.

The dispute centres on whether prediction markets serve as legitimate risk-management and forecasting tools or simply function as unregulated betting platforms disguised as financial infrastructure.

The Commodity Futures Trading Commission has defended prediction markets as valuable economic forecasting mechanisms, while multiple US states argue the platforms are bypassing local gambling laws and avoiding gaming taxes.

Prediction markets have rapidly expanded into a multi-billion-dollar sector with monthly trading volume exceeding $20 billion, driven by growing interest in betting on politics, economics, sports and corporate events.

Supporters of the industry point to examples including Federal Reserve references to prediction market data as a useful benchmark for economic expectations and Ford’s internal prediction markets reportedly outperforming expert vehicle sales forecasts.

“We believe prediction markets are emerging as a powerful new layer of financial infrastructure, enabling real-time price discovery around events, probabilities, and the evolving state of the world,”

Said Ark Invest chief executive, Cathie Wood, following a recent Kalshi funding round.

Polymarket has recently expanded institutional partnerships through agreements linked to Nasdaq Private Market, the New York Stock Exchange, Yahoo Finance and Google, aiming to position prediction markets as broader financial infrastructure rather than purely retail speculation products.

Critics remain unconvinced, with Plannatech chief executive Adam Bjorn arguing that the dominance of sports and political trading volumes proves the platforms are “100% gambling platforms,” while conflicting court rulings across multiple US states have increased the likelihood that the legal battle may eventually reach the Supreme Court.