TLDR
- The Trump administration’s CFTC is backing prediction markets Kalshi and Polymarket against state bans
- Nevada sued Kalshi after a federal appeals court rejected its request to pause state enforcement
- CFTC Chairman Michael Selig argues prediction market contracts are federal derivatives, not gambling
- Donald Trump Jr. has invested in Polymarket and is a strategic advisor for Kalshi, raising conflict of interest questions
- Several states including Nevada, Massachusetts, and Tennessee have filed lawsuits or cease-and-desist orders against these platforms
The Trump administration has taken sides in a growing legal fight over whether prediction markets like Kalshi and Polymarket are financial products or illegal gambling.
The Commodity Futures Trading Commission (CFTC), under new Chairman Michael Selig, filed a legal brief supporting federal oversight of prediction markets. Selig argues that state governments cannot ban platforms that are already regulated at the federal level.
The dispute centers on whether event contracts — where users buy and sell positions on the outcome of real-world events — count as financial derivatives or as sports betting.
Kalshi and Polymarket allow users to trade contracts priced between one cent and 99 cents. The price reflects the market’s estimated probability that an event will occur, from sports results to weather to political outcomes.
Around 90% of Kalshi’s trading volume comes from sports-related contracts. Polymarket sees roughly half of its volume in sports markets. Kalshi reported over $1 billion in trading volume during the Super Bowl alone.
Nevada has been the most aggressive state in pushing back. The Nevada Gaming Control Board sued Kalshi, saying it runs an unlicensed sports betting operation in violation of state law. A federal judge sided with Nevada and issued a temporary restraining order against Kalshi.
Nevada Escalates Legal Action
The U.S. Court of Appeals for the Ninth Circuit then rejected Kalshi’s request to pause Nevada’s enforcement actions. Within hours of that ruling, Nevada filed a civil lawsuit seeking to permanently block the platform from offering sports contracts to state residents.
Kalshi has since moved to transfer the case to federal court, arguing that federal law preempts state gambling rules. The company maintains its contracts are financial derivatives, not bets.
The CFTC’s involvement came through an amicus, or “friend of the court,” brief filed in support of Kalshi’s position. Selig published an op-ed in the Wall Street Journal stating the agency will no longer allow states to undermine its jurisdiction.
“To those who seek to challenge our authority in this space, let me be clear, we will see you in court,” Selig said.
Conflict of Interest Questions Raised
President Trump’s son, Donald Trump Jr., has invested in Polymarket through his venture capital firm and serves as a strategic advisor for Kalshi. Critics have raised questions about whether the administration’s support for these platforms creates a conflict of interest.
Selig also recently announced an “Innovation Advisory Committee” to help shape CFTC regulations. The 35-member panel includes the CEOs of Polymarket, Kalshi, Coinbase, Robinhood, FanDuel, and DraftKings. The panel has no seats for consumer advocates or public interest groups.
Not all Republicans support the CFTC’s position. Utah Governor Spencer Cox publicly pushed back, writing on Twitter that prediction markets are “gambling — pure and simple.”
Massachusetts and Tennessee have also issued lawsuits or cease-and-desist orders against prediction market platforms. Kalshi has not ruled out an emergency appeal to the U.S. Supreme Court.
