What happened between Kalshi, the CFTC and the states of Minnesota and Rhode Island?

Kalshi and the US Commodity Futures Trading Commission (CFTC) launched legal challenges against actions taken by Minnesota and Rhode Island targeting prediction market platforms. The disputes focus on whether states can regulate or restrict prediction markets that the CFTC considers federally regulated financial products.

Why did Kalshi sue Minnesota?

Kalshi sued Minnesota after the state passed a law prohibiting the advertising, operation and facilitation of prediction market platforms. The company argues that federal law gives the CFTC exclusive authority over prediction market contracts, making the state law unconstitutional.

What is the CFTC’s argument in these prediction market lawsuits?

The CFTC argues that prediction market event contracts are swaps traded on federally regulated contract markets. Under that interpretation, the agency says federal law takes precedence over state laws that attempt to regulate or ban those contracts.

Why is Rhode Island challenging Kalshi and Polymarket?

Rhode Island Attorney General Peter Neronha argues that certain sports-related event contracts offered by Kalshi and Polymarket are effectively bets under state law. The state is seeking a legal ruling on whether those products should be treated as gambling rather than federally regulated financial contracts.

Could these prediction market cases reach the US Supreme Court?

Yes. Different courts have issued conflicting rulings on whether the CFTC has exclusive jurisdiction over prediction markets. If lower courts continue to disagree, the issue could ultimately be decided by the US Supreme Court.

Why does this legal fight matter for prediction market investors and traders?

The outcome could determine whether prediction market platforms can operate nationwide under a single federal framework or face different rules in each state. Greater regulatory certainty could support growth, while adverse rulings could limit market access and product offerings.

How might Kalshi and Polymarket be affected if states win these cases?

If states prevail, prediction market operators could face restrictions, licensing requirements or outright bans in certain jurisdictions. That could increase compliance costs and make it harder for platforms to scale across the US.

What did President Donald Trump say about prediction markets?

Trump publicly stated that it is “critically important” for the CFTC to retain sole authority over prediction markets. His comments came despite family connections to the sector, as Donald Trump Jr. advises Kalshi and Polymarket and has invested in the latter through 1789 Capital.

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Prediction markets clash with States over CFTC authority

Written by Jon CuthbertPublished May. 28 2026Last Updated May. 28 2026

The legal battle over prediction markets intensified after Minnesota enacted a law prohibiting the advertising, operation and facilitation of prediction market platforms, prompting lawsuits from both Kalshi and the US Commodity Futures Trading Commission.

The CFTC and Kalshi argue that prediction market event contracts qualify as swaps traded on federally regulated contract markets and therefore fall under the agency’s exclusive jurisdiction rather than state authority.

“Exclusive authority over prediction markets rests with the CFTC under the Commodity Exchange Act and the Supremacy Clause of the US Constitution,”

Kalshi argued in its constitutional challenge against Minnesota.

The dispute expanded on Thursday when the CFTC announced a joint filing with Kalshi against Rhode Island officials after Attorney General Peter Neronha sought a declaration that sports-related event contracts offered by Kalshi and Polymarket amounted to illegal bets under state law.

The cases have increased the likelihood that the issue could eventually be decided by the US Supreme Court, as some courts have accepted the CFTC’s jurisdictional arguments while others have rejected them.

The debate has also drawn political attention after US President Donald Trump publicly backed the CFTC’s authority over prediction markets despite family ties to the industry through his son, Donald Trump Jr., who advises Kalshi and Polymarket and has invested in the latter through venture firm 1789 Capital.

The controversy comes as lawmakers scrutinise prediction market platforms over concerns that elected officials could potentially use insider information when trading event contracts, with congressional investigators recently seeking information from the chief executives of Kalshi and Polymarket regarding their safeguards against insider trading.