While it is legal to bet using online prediction markets in the United States, pushback has begun against a practice that many states say is harmful to their residents. Officials have initiated numerous lawsuits against major betting platforms like Kalshi and Polymarket, but they may face an uphill battle as these prediction markets continue to grow more popular.
At least 20 lawsuits nationwide
Many states have alleged that the online prediction community is essentially a front for gambling. At least 20 federal lawsuits have been filed nationwide, “disputing whether companies such as Kalshi and Polymarket should be treated as federally regulated financial exchanges, as they maintain,” said The Guardian. But the lawsuits claim these companies are “gambling operations that should be regulated like state-licensed sportsbooks.” Polymarket was previously banned in the U.S. but was largely reinstated in 2025.
These lawsuits say the industry is harmful because companies “let users trade on the outcome of virtually anything, ranging from sports and elections to award shows, speeches and even what someone might wear,” said The Guardian. The users essentially bet against each other while platforms collect transaction fees, differing from casinos where players bet “against an established ‘house.’” These companies fall under “federal commodities law and are currently overseen by the Commodity Futures Trading Commission rather than under state gaming regulators,” making the platforms available in all 50 states.
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One of the most notable lawsuits is in Nevada, where the state’s “effort to block the prediction market platform Kalshi is moving through multiple courts,” said NBC News. Officials in Nevada allege that Kalshi, “through its prediction market contracts, is offering people a way to illegally bet on sports,” though Kalshi maintains it is just a financial exchange platform. But many of these lawsuits are also facing their own headwinds. In “Massachusetts alone, Robinhood and Polymarket have sued to block” legal maneuvers by the attorney general, said Bloomberg Law.
‘A full-blown war’
As the lawsuits continue, there are also political aspects to the rift between lawmakers and prediction markets. This has “escalated into a full-blown war, and battle lines aren’t being neatly drawn along party lines,” said Wired. Liberals and conservatives often find themselves defending the same cause. One side “argues that the platforms are breaking the law by operating as shadow casinos. The other insists they are just giving people access to legitimate financial markets already subject to adequate government oversight.”
Prediction markets have also become “entrenched in mainstream culture, a transformation that has brought vast sums of money into play,” said Wired. But in court, challenges to “sports prediction markets have won early victories,” said The New York Times, which could be “devastating for prediction markets” as a whole. Kalshi’s “own data shows that $12.5 billion of its total trading volume comes from sports-related contracts.” All of its other categories combined generate just $4.7 billion.
The 2028 election could also have implications for the market, particularly if Democrats win back the White House and go after such brands. “These sportsbook companies want to be fast, they want to be active, they want to get a good return on what they’re spending right now,” Chad Beynon, a senior analyst at Macquarie Group, told the Times, “knowing that this could go away in 2028.”
