US Prediction Market Fight Escalates as Courts, CFTC Clash Over Oversight
Kalshi loses more court rounds in Connecticut and Washington as the CFTC unveils a regulatory roadmap for event contracts.
This article was produced with AI assistance and edited by the ON360 newsroom.
The legal fight over prediction markets in the United States pushed further into federal appeals courts this week, with Kalshi suffering fresh setbacks in Connecticut and Washington state even as the Commodity Futures Trading Commission signalled it will draft formal rules for the sector.
The developments, reported by Gambling Insider, show a market still without a settled regulatory home. Exchanges are testing state limits in court while the federal regulator works out how much authority it actually holds.
Court setbacks pile up for Kalshi
U.S. Circuit Judge Sarah A. L. Merriam of the Second Circuit Court of Appeals denied Kalshi’s request for a temporary injunction against Connecticut, referring the matter to a three-judge panel. Connecticut has until Aug. 24 to file its opposition.
That follows an earlier loss. U.S. District Judge Vernon D. Oliver had already denied Kalshi both a preliminary injunction and a subsequent injunction pending appeal in the same Connecticut dispute.
In Washington state, Kalshi has begun restricting access to event contracts covering sports, elections and politics, culture, technology and science, and so-called mentions markets. The move follows a state court’s preliminary injunction. Kalshi has asked the judge to reconsider the amended order, or at minimum to stay it.
Crypto.com took a different route in the same state. It agreed with Washington officials to pause their federal litigation while related Ninth Circuit appeals involving Crypto.com, Kalshi and Robinhood in Nevada work through the courts. Washington will hold off on certain enforcement until the Ninth Circuit rules on at least one of those cases.
New York and the CFTC keep clashing
A separate dispute is playing out between New York and the CFTC over the federal regulator’s emergency order allowing Kalshi to keep operating even if a court tells it to stop. New York sought permission to respond to that order; the CFTC objected, arguing a district court is the wrong venue to challenge an agency order.
U.S. District Judge Lorna G. Schofield sided with New York, setting an Aug. 31 deadline for its response and giving the CFTC until Sept. 7 to reply.
CFTC outlines a roadmap, insiders spar over rules
At the CFTC’s first Innovation Advisory Committee meeting, Chairman Michael Selig said the agency plans new rules covering consumer protection, product governance and market design for federally regulated event contracts. He reiterated that the CFTC retains authority over the sector.
Not everyone agreed on the details. CME Group Chairman and CEO Terry Duffy challenged the CFTC’s approach to self-certified contracts, clashing publicly with Selig and Kalshi co-founder Luana Lopes Lara over which event contracts exchanges should be allowed to list.
Separately, federal prosecutors are opposing a bid to dismiss charges against Gannon Ken Van Dyke, a U.S. soldier accused of using classified military information to trade Venezuela-related contracts on Polymarket. Prosecutors allege he made more than $400,000. Van Dyke argues the contracts are not swaps under the Commodity Exchange Act; the Department of Justice disagrees, citing Congress’s broad definition of swaps.
Amid the legal turbulence, newcomer Novig reported more than $125 million in notional trading volume in its first week after a nationwide launch, with $26.3 million on its busiest single day. The company says its opening-week sports volume topped the launch-week totals of Kalshi, Polymarket US, Underdog and DraftKings’ DKeX.
None of these products are licensed in Canada. Ontario’s regulated sports betting and iGaming market runs through the AGCO and iGaming Ontario, with operators required to offer deposit limits, self-exclusion and other player protection tools that unregulated prediction markets do not provide.
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