Prediction markets are legal at the federal level across all 50 US states — Kalshi and the Polymarket US app both operate under the Commodity Futures Trading Commission (CFTC) — but as of July 2026 more than a dozen states are trying to ban or restrict them, and courts have split on whether they can. The result is a live, unsettled map: legal nationwide on paper, contested or shut down in specific states, and heading toward a likely Supreme Court decision.

This is the state-by-state picture as it actually stands in mid-July 2026 — who has banned what, which courts have sided with whom, and why the fight now runs through federal preemption rather than gambling law.

Key takeaways

  • Federally, prediction markets are legal in all 50 states. Kalshi and Polymarket’s US app are regulated by the CFTC as designated contract markets trading event contracts (legally, “swaps”).
  • At the state level, at least a dozen states are fighting them — Minnesota passed the first outright ban, with felony penalties taking effect August 1, 2026.
  • The core legal question is federal preemption. The Third Circuit ruled on April 6, 2026 that the Commodity Exchange Act preempts state gambling law for these contracts; the Ninth Circuit has leaned the other way, setting up a circuit split.
  • The CFTC has gone on offense, suing states directly after the Ninth Circuit let state enforcement proceed — turning a defensive fight into a federal one.
  • A Supreme Court case looks likely. Traders on the platforms themselves price roughly a 64% chance the Court takes a prediction-market case by the end of 2026.

The reason “are prediction markets legal in the US” has no clean yes-or-no answer is that two layers of law disagree. Federally, Kalshi and the Polymarket US app are registered with the CFTC and offer event contracts — binary yes/no markets on outcomes like elections, rate cuts, or sports results. The CFTC treats these as swaps under the Commodity Exchange Act (CEA), which puts them squarely inside federal commodities regulation rather than state gambling law.

Many states see the same product differently: a yes/no market on who wins a football game looks, to a state regulator, like an unlicensed sports bet. That framing is what drives nearly every state action below. The dispute is not really about whether prediction markets are gambling in spirit — it is about which government gets to decide.

If you are new to how these venues work and why crypto traders drove their growth, our explainer on Kalshi and the “new Wall Street” covers the mechanics and the business model behind the legal fight.

Which states have banned or restricted prediction markets

As of July 2026, actions cluster into three tiers — outright bans, court-ordered shutdowns, and pending challenges.

Outright ban — Minnesota. Minnesota became the first state to formally ban prediction markets, with a law signed May 18, 2026 that takes effect August 1, 2026. It makes it a felony to host, advertise, or provide supportive services for platforms like Kalshi or Polymarket in the state. The CFTC filed suit seeking an injunction the following day, May 19.

Court-ordered shutdowns — Michigan and Nevada. An Ingham County judge ordered Kalshi to temporarily halt Michigan operations, with the state’s attorney general arguing it functions like unlicensed sports betting. In Nevada, a federal district judge enjoined Kalshi, and the Nevada Gaming Control Board secured a preliminary injunction against Polymarket; both rulings are on appeal to the Ninth Circuit.

Fines and enforcement — Ohio. The Ohio Casino Control Commission fined Kalshi $5 million for violating state gaming laws.

Cease-and-desist and litigation — Arizona, Maryland, Massachusetts, Connecticut, Illinois, New York, Wisconsin, and others. Arizona pursued criminal charges against Kalshi over election-betting laws before a federal judge blocked them, with appeals pending. Maryland and Massachusetts argue sports event contracts are unlicensed bets. New York proposed the “ORACLE Act” to regulate prediction exchanges; the CFTC countersued preemptively. Wisconsin sued Kalshi, Polymarket, Robinhood, Crypto.com, and Coinbase in April 2026. Rhode Island, Tennessee, Texas, Utah, and Washington have various actions underway.

Why the fight is really about federal preemption

The decisive legal question is preemption — whether federal commodities law overrides state gambling law for these contracts. On April 6, 2026, the US Court of Appeals for the Third Circuit became the first federal appellate court to hold that the CEA preempts state gambling laws as applied to sports-related event contracts on CFTC-registered markets. In a 2-1 opinion, it affirmed an injunction barring New Jersey from enforcing its gambling laws against Kalshi, reasoning that the contracts are “swaps” shielded by field and conflict preemption.

The Ninth Circuit has pointed the other direction. At consolidated oral arguments on April 16, 2026 involving Kalshi, Robinhood, and Crypto.com against the Nevada Gaming Control Board, the panel appeared to lean toward the state. A ruling for Nevada would create a circuit split — the classic trigger for Supreme Court review.

That divide is why a national product can be simultaneously legal and shut down: which appellate circuit you are in currently changes the answer.

The CFTC has switched from defense to offense

A notable shift in 2026 is that the federal government stopped waiting to be sued. After the Ninth Circuit allowed state enforcement actions to proceed, the CFTC launched its own campaign against multiple states, reaffirming what it calls exclusive jurisdiction over event contracts — including in a filing to the Massachusetts Supreme Judicial Court. Analysts describe this as substitution rather than mere escalation: the CFTC supplying the offensive legal posture the platforms could not reliably hold state by state.

Meanwhile the platforms keep expanding into new products — commodities markets, and the move into regulated perpetual futures that mirrors what on-chain venues pioneered, a dynamic we covered in Hyperliquid’s winner-take-all playbook. More products means more surface area for state regulators to contest, even as the federal position hardens.

Where this is heading

Prediction-market traders price roughly a 64% probability that the Supreme Court takes a sports-event-contract case by year-end 2026, with petitions expected to be filed between July and September and a possible grant late in the year. Until then, expect the patchwork to persist: legal federally, banned in Minnesota from August 1, shut down or fined in a handful of states, and cleared in others.

For anyone using these platforms, the practical takeaway as of July 2026 is that access depends on your state and the current status of its litigation — not on a single national rule. The trend line, driven by the volume of dollars now flowing through these venues (which by some measures has surpassed sportsbook wagering, per Pew Research), points toward eventual federal resolution rather than a state-by-state retreat.

Frequently asked questions

Yes, federally. Kalshi and the Polymarket US app are CFTC-regulated and legal nationwide as a matter of federal law as of July 2026. However, individual states — led by Minnesota, whose ban takes effect August 1, 2026 — are attempting to ban or restrict them, and courts have not fully resolved whether states can.

No. While Kalshi operates under federal CFTC authority, it faces bans, injunctions, and fines in specific states including Minnesota, Nevada, Michigan, and Ohio. Whether it can legally operate in a given state currently depends on that state’s litigation status and which federal appellate circuit governs it.

Why do states say prediction markets are illegal?

States generally argue that yes/no event contracts on outcomes like sports games are functionally unlicensed sports bets, which fall under state gambling law. The platforms and the CFTC counter that the contracts are federally regulated swaps under the Commodity Exchange Act, which preempts state gambling rules.

Likely. A split between the Third Circuit (which sided with federal preemption) and the Ninth Circuit (which leaned toward the states) sets up Supreme Court review. As of July 2026, traders on the platforms themselves price about a 64% chance the Court takes a case by the end of the year.

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