Key takeaways
Federal regulator: The Commodity Futures Trading Commission (CFTC) regulates prediction markets as designated contract markets under the Commodity Exchange Act.
State regulators: State gaming commissions, lotteries, and racing boards license sportsbooks, and tribes regulate betting on their lands under the Indian Gaming Regulatory Act.
The overlap: A sports event contract looks like a futures product to the CFTC and like a sports bet to most state regulators, and both claim it.
The CFTC’s position: In October 2026 it proposed defining event contracts, sports included, as swaps under its jurisdiction, and it adopted a rule that sportsbook wagers and casino games are not swaps.
Still open: The federal appeals courts disagree on whether states can apply their gambling laws to these contracts, and three petitions are asking the Supreme Court to take up the question.
Two regulators, two products
A sportsbook and a sports prediction market can offer a bet on the same game, but they answer to different governments. Sportsbooks are licensed state by state. Murphy v. NCAA, decided May 14, 2018, ended the federal ban on state-authorized sports betting, and since then each state has decided whether to legalize betting, who may offer it, and on what terms. There’s no federal sportsbook license.
Prediction markets get their authority from Washington. The CFTC designates exchanges, called designated contract markets, to list contracts on future events, and the Commodity Exchange Act gives the agency exclusive jurisdiction over trading on them. Kalshi, Polymarket US, ProphetX, and Novig are among the designated markets that list sports contracts. The CFTC designated ProphetX on June 11, 2026, and Ludlow Exchange, LLC, which runs Novig, on June 16, 2026.
The enforcement tracker logs each letter, lawsuit, and ruling.
What the CFTC controls
The CFTC decides which companies may run an exchange and clear trades, and it sets the rules they operate under: market surveillance, financial safeguards, customer fund protection, and reporting. It also polices fraud and manipulation on those markets.
It doesn’t approve each contract in advance, and it isn’t required to. A designated market can list a new contract by filing a self-certification that the contract complies with the law, and Kalshi listed its first sports contracts that way in January 2025. The agency’s check comes after the fact. Under the Commodity Exchange Act’s special rule, the CFTC may find that an event contract involving unlawful activity, terrorism, assassination, war, gaming, or similar activity is contrary to the public interest, and a contract it rejects can’t be listed (7 U.S.C. 7a-2(c)(5)(C)).
The agency has spent 2026 writing that power into rules:
February 4, 2026: Withdrew its 2024 proposal on event contracts and a 2025 staff advisory on sports contracts.
March 16, 2026: Asked for public comment on how its rules should apply to prediction markets.
June 10, 2026: Proposed factors for deciding when an event contract is contrary to the public interest, plus a definition of “gaming.”
October 9, 2026: Proposed defining “swap” to include event contracts based on sports, politics, culture, and weather. The proposal was published on October 19, with comments due November 18, 2026. The CFTC also issued an interim final rule, effective October 19, stating that sportsbook wagers and casino games are not swaps.
None of that gives the CFTC a role in the things a state commission handles for sportsbooks. It doesn’t collect state betting taxes, license by state, or set a minimum age, so each platform sets its own.
What state regulators control
State regulators set the terms for licensed sportsbooks. They choose how many licenses to issue and to whom, set the minimum age, approve which bets are allowed, require geolocation, and tax the books’ revenue. Who holds that power varies. A gaming commission or control board regulates betting in most states, the lottery runs or contracts out the state’s sportsbook in New Hampshire, Oregon, Delaware, Rhode Island, and Montana, and tribal casinos operate under compacts with the state.
Most state regulators read their gambling laws to cover sports event contracts too, and they’ve used that authority against the platforms through cease-and-desist letters, civil suits, and, in Minnesota, a 2026 law making it a felony to run a prediction market. A federal judge has blocked that law for CFTC-registered markets since July 27, 2026.
States also regulate through their own licensees. Kentucky’s HB 904 took effect July 15, 2026, and stops the state’s licensed tracks, sportsbooks, and fantasy operators from offering prediction markets or working with them. On October 20, 2026, the Ohio Casino Control Commission told its licensed operators, suppliers, and service providers to certify by October 30 that they had stopped supporting sports event contracts in Ohio, and it said license denial, suspension, or revocation could follow for those that don’t.
Tribes have their own claim. In Blue Lake Rancheria v. Kalshi, a Ninth Circuit panel ruled on September 16, 2026, that two California tribes were likely to show Kalshi’s sports contracts are class III gaming under the Indian Gaming Regulatory Act when entered from tribal land. On November 4, 2026, the district court issued a preliminary injunction barring Kalshi from offering sports contracts on those tribes’ lands. The California guide covers that case.
Where the CFTC and the states collide
The dispute is whether federal law preempts state gambling law for sports contracts on a CFTC-designated market. The platforms say yes, because the contracts are swaps traded on federally regulated exchanges. The states say a bet on a game is gambling whatever it’s called.
Federal appeals courts have answered both ways. On April 6, 2026, the Third Circuit ruled for Kalshi against New Jersey. The Ninth Circuit found for Nevada on August 28, 2026, and the Sixth Circuit ruled for Ohio and Tennessee on September 25, holding that Kalshi hadn’t shown its sports contracts are swaps. A ruling binds federal courts in its own circuit, so the answer currently depends on where you live.
New Jersey’s petition asking the Supreme Court to review the Third Circuit decision, Flaherty v. KalshiEX, No. 26-299, has Kalshi’s response due December 7, 2026, after two extensions. Petitions from Robinhood and Crypto.com’s exchange over the Nevada ruling, Nos. 26-338 and 26-344, have Nevada’s responses due November 13 and 16. If the Court takes a case, its decision would govern every state. Until it rules, or Congress acts, each side keeps enforcing its own reading.
The CFTC’s October proposal goes to the same point. If it’s finalized, the agency will have written down that sports event contracts are swaps, and courts will decide how much weight that carries against state gambling law.
What it means when you use one
On a licensed sportsbook, your rights come from the state: the regulator can order a book to pay a disputed bet, and the app has to follow the state’s rules on age, location, and bet types. A problem with a prediction market goes to the platform first and then to the CFTC, which takes tips and complaints through its online form.
Whether a market will take your trade also depends on the state. Some platforms block states that have ordered them out, and others keep operating while they challenge the order in court. Novig’s eligibility list, for example, covers every state but Nevada, Arizona, and Michigan.
FAQ
Does the CFTC regulate sports betting?
No. The CFTC regulates prediction markets and the event contracts they list. Sportsbooks are licensed and regulated by states, and in October 2026 the CFTC adopted a rule stating that sportsbook wagers aren’t swaps.
Who regulates Kalshi and Polymarket?
The CFTC. Both are designated contract markets: Kalshi since November 2020, and Polymarket’s US exchange, QCX LLC, since July 2025. Several states argue their gambling laws apply as well, and that question is in court.
Can a state ban prediction markets?
Minnesota passed a law making it a felony to run one, and a federal judge blocked it for CFTC-registered markets in July 2026. Other states have sent cease-and-desist letters or sued, and those cases aren’t settled. Whether those efforts hold depends on how the federal courts resolve the preemption question.
What is a designated contract market?
A designated contract market is an exchange the CFTC has approved to list futures and other contracts, including event contracts. The CFTC’s website lists every designated market.
Will the Supreme Court decide who regulates prediction markets?
Possibly. Three petitions are pending, and the Court won’t decide whether to take a case until briefing closes. A decision on the preemption question would apply nationwide.
You must be 21 or older to bet in most states. Gamble responsibly. If gambling stops being fun, call or text the national helpline at 1-800-MY-RESET (ncpgambling.org).