Prediction markets face legal fights and World Cup boom

A Washington state judge granted a preliminary injunction this week against Kalshi, finding officials were likely to prevail on claims that the company’s event contracts violate state gambling laws. The court rejected Kalshi’s argument that federal law preempts state gambling statutes.

Two days after the ruling, OG, the prediction-market unit of Crypto.com, filed a preemptive federal lawsuit against Washington officials. OG argued that state guidance, the Kalshi lawsuit and the injunction create a real threat of similar enforcement against other platforms. The Commodity Futures Trading Commission previously issued an order requiring Kalshi to honor certain trades in Michigan, an action that drew attention during congressional hearings.

The House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a hearing focused on customer protections and market integrity in sports-event prediction markets. Witnesses who support federal oversight described the contracts as derivatives under CFTC jurisdiction. Representatives of the gaming industry argued the contracts resemble sports betting while avoiding state licensing, taxation, responsible-gambling safeguards and tribal gaming rights. Lawmakers questioned the CFTC’s staffing and resources to oversee sector growth and examined the agency’s recent enforcement steps.

State regulators and officials have taken separate actions. The Wisconsin Elections Commission warned residents that trading prediction contracts tied to elections could expose them to felony charges and may disqualify them from voting under a state law barring those who have “made or become financially interested in a bet on its outcome.” In Arizona, several state and local agencies moved to bar employees from trading on prediction markets using nonpublic information after a governor’s executive order addressing insider trading by state staff.

On the legislative front, Representatives Steven Horsford and Mark Amodei introduced the Prediction Markets Are Gambling Act on July 22, a federal bill that would bar registered entities from listing, clearing or trading contracts tied to sporting events, athletic competitions and casino-style games. On the same day, Pennsylvania lawmakers filed House Bill 2711 to create a state regulatory framework requiring age verification, self-exclusion tools and controls against insider trading and manipulation; that bill would not create a state licensing system or impose taxes on the markets.

Activity on prediction platforms surged during the 2026 FIFA World Cup. Kalshi reported roughly $22 billion to $27 billion in World Cup trading volume and said it added about three million users during the tournament, with nearly $1.9 billion traded in its final-winner market. Independent trackers estimated Kalshi’s individual-market volume at about $13.8 billion for the event. Polymarket reported about $14.3 billion across its international and U.S. platforms. H2 Gambling Capital estimated prediction markets accounted for about 27% of comparable U.S. sports betting activity during the World Cup. DraftKings reported that its prediction product set records for trading volume and active customers, and that the World Cup Final drew more than two million bets in its sportsbook.

Industry participants announced new products and regional restrictions. ProphetX partnered with Players’ Lounge to offer CFTC-regulated sports prediction contracts to competitive video-game players. Kalshi and Polymarket restricted access for users in Ireland after a local regulator warned platforms they could face enforcement for operating without a gambling license; Polymarket recently limited access in several other European countries and some Canadian provinces. Kalshi also launched a midterms hub combining political contract prices with polling, fundraising and historical election data.

State court rulings, federal litigation, proposed federal and state legislation, regulatory guidance and international licensing actions are unfolding at the same time. Platforms maintain they operate as federally regulated derivatives in the United States, while a number of foreign regulators classify prediction contracts as gambling products requiring local licenses.