Prediction markets processed $24 billion in monthly trading volume in April 2026 and generated $27 billion in World Cup-related volume in July alone. The sector now runs at an annualized revenue rate above $3 billion, according to Citizens Bank estimates. Behind these figures, a jurisdictional co...
"No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple." — Letitia James, Attorney General, State of New York
Prediction markets processed $24 billion in monthly trading volume in April 2026 and generated $27 billion in World Cup-related volume in July alone. The sector now runs at an annualized revenue rate above $3 billion, according to Citizens Bank estimates. Behind these figures, a jurisdictional conflict is accelerating: on July 28, 2026, 44 state attorneys general submitted a joint letter to the CFTC arguing the agency lacks authority to regulate sports-related event contracts, three days before New York filed a state-court lawsuit against Kalshi alleging it operates an "illegal gambling operation."
The CFTC is currently in active litigation against nine states that have attempted to restrict or ban prediction market platforms under state gambling statutes. The agency's position — that event contracts are swaps falling under exclusive federal jurisdiction — is being tested simultaneously in multiple federal courts. Meanwhile, new entrants continue filing for licenses: Binance.US announced plans on July 29 to apply for Designated Contract Market (DCM) status in August 2026, joining Gemini, which secured both DCM and Derivatives Clearing Organization (DCO) approvals earlier this year. The outcome of this federal-state clash will determine whether prediction markets operate as nationally unified financial exchanges or fragment into a state-by-state licensing regime.
Monthly prediction market trading volume rose from under $5 billion in September 2025 to approximately $24 billion in April 2026, according to Pew Research Center tracking data. Kalshi and Polymarket together account for 85%–90% of total sector volume. DeFi Rate's tracker placed Kalshi at roughly 73% market share in early July 2026, against Polymarket's 27%.
Kalshi closed May 2026 with $17.91 billion in notional volume, its ninth consecutive monthly record. By June 2026, the platform reported $31 billion in monthly volume. The company claims between 2 million and 4 million active monthly users, though independent verification of these figures remains limited.
Polymarket US, which received a no-action letter from the CFTC in January 2026, recorded $1.3 billion in trading volume in April 2026 on its domestic platform, against $9 billion on Polymarket International. Polymarket drew 678,342 unique users in April, more than eight times Kalshi's implied unique user base, though Kalshi processes far higher dollar volume per user.
Annualized sector revenue surpassed $3 billion as of late February 2026, up from approximately $2 billion in December 2025, per Citizens Bank estimates. Bernstein projects that prediction market volumes could reach $1 trillion annually by 2030. Kalshi alone has annualized revenue exceeding $1.5 billion, according to industry trackers.
The 2026 FIFA World Cup, held across the United States, Mexico, and Canada from June 11 to July 19, accelerated prediction market adoption and intensified the regulatory conflict. Kalshi recorded $27 billion in total World Cup-related trading volume when including parlay contracts, or $12.4 billion excluding parlays. The platform processed approximately 3 million users during the tournament period.
Prediction markets collectively handled over $50 billion in World Cup-related volume, according to CoinDesk reporting, eclipsing traditional sportsbook volumes for the event. Kalshi recorded $223 million in volume on the England vs. Mexico match alone — the highest single-result sports volume in prediction market history.
According to Fortune reporting, prediction markets accounted for 27% of total sports wagering during the World Cup period. This figure is what prompted 44 state attorneys general to act. The rapid growth of sports-related event contracts on prediction market platforms had, in their view, crossed from financial derivatives territory into sports betting — an activity regulated at the state level since the Supreme Court's 2018 Murphy v. NCAA decision.
The core legal question: are event contracts on prediction markets federally regulated financial instruments under the Commodity Exchange Act (CEA), or are they gambling products subject to state licensing, taxation, and consumer protection requirements?
The CFTC has taken the position that it holds exclusive jurisdiction over all event contracts traded on its registered exchanges. The commission initiated litigation against nine states: Arizona, Connecticut, Illinois, Kentucky, Minnesota, Wisconsin, New Mexico, Rhode Island, and Michigan. On April 2, 2026, the CFTC and DOJ filed a joint federal lawsuit against Illinois, seeking an injunction against the state's application of gambling laws to CFTC-registered exchanges. Kentucky became the ninth state sued in June 2026 — and the first Republican-led state targeted.
Arizona escalated further by filing criminal charges against Kalshi in March 2026, the first criminal action ever brought against a CFTC registrant. Ohio's Casino Control Commission issued notice of intent to fine Kalshi $5 million for offering illegal gambling in April.
On the federal preemption front, Kalshi filed its own suit against Iowa in March 2026, arguing that federal commodities law preempts state gambling and election-wagering laws. In New Jersey, Kalshi prevailed in a Third Circuit appeal that affirmed federal preemption.
On July 28, 2026, 44 state attorneys general submitted a joint comment letter to the CFTC as its proposed rulemaking comment period closed. The letter argued that the CFTC lacks statutory authority to regulate sports-related event contracts, and urged the commission to withdraw and rewrite its proposed rule. This near-unanimous state opposition represents the broadest coordinated pushback the CFTC has faced from state regulators.
Minnesota became the first state to outright ban prediction markets in May 2026, with enforcement set for late July. However, on July 27, a federal judge issued a temporary injunction suspending that enforcement.
On June 10, 2026, the CFTC published a Notice of Proposed Rulemaking (NPRM) to amend Regulation 40.11, creating a formal framework for event contract oversight. The comment period closed July 27, 2026.
The proposed rule establishes a three-step analytical framework. First, the CFTC must determine that the instrument is an agreement based on an occurrence or contingency of an excluded commodity. Second, the commission must determine that the contract "involves" an enumerated prohibited activity — terrorism, assassination, war, unlawful activity, or gaming. Third, the CFTC must determine that the contract is contrary to the public interest.
Under the proposal, the CFTC must initiate review within 10 days of a contract listing and issue any prohibition order within 90 days. If no order is issued, the contract is deemed approved. This structure would create a permissive default — contracts that survive the 90-day window operate under federal oversight with no additional state-level licensing requirement.
The 44-state comment letter specifically targeted this framework, arguing it would effectively federalize oversight of sports wagering — a $20 billion annual state tax revenue source, according to the American Gaming Association — without congressional authorization.
New York's lawsuit, filed in state court on July 31 by Governor Kathy Hochul and Attorney General Letitia James, alleges that Kalshi operates an "illegal, unlicensed gambling operation" by offering wagering on sports, elections, and cultural events without obtaining approval from the New York State Gaming Commission.
The complaint alleges three categories of violations: operating without a state gambling license, failing to enforce New York's 21-year minimum age requirement for mobile sports betting, and failing to pay state gambling taxes. The state seeks an injunction halting Kalshi operations in New York, restitution, fines, and disgorgement of profits.
This filing follows U.S. District Judge Analisa Torres's July 8 decision refusing Kalshi's request for a preemptive federal injunction against New York's gambling laws. New York is the highest-population state to bring direct enforcement action, and its suit targets Kalshi's largest single-state user base.
Kalshi has not yet filed a formal response to the New York complaint. The company's general position, stated in prior litigation, is that CFTC registration preempts state gambling laws.
Despite the legal uncertainty, new platforms continue entering the prediction market sector under CFTC oversight.
Gemini secured DCM registration in December 2025 through its subsidiary Gemini Titan, becoming the first crypto-native exchange approved to operate a U.S. prediction market. In April 2026, Gemini Olympus received DCO (Derivatives Clearing Organization) approval, enabling in-house clearing and settlement. The company's shares surged on the announcement, per CoinDesk reporting.
Binance.US CEO Stephen Gregory announced at the Rare Evo conference in Las Vegas on July 29 that the company will submit a DCM application to the CFTC in August 2026. The filing is part of a broader strategy to rebuild the exchange's U.S. business with lower trading fees and expanded product offerings including prediction markets and perpetual futures.
Polymarket received a CFTC no-action letter in January 2026, enabling its domestic re-entry after previously withdrawing from the U.S. market. However, the CFTC opened an investigation into Polymarket in June 2026 focused on insider trading within political and geopolitical contracts. Separately, Dutch regulators fined Polymarket €420,000 for delayed market exit.
The pipeline of license applications suggests industry participants are betting that CFTC preemption will hold. A Designated Contract Market license carries implicit federal protection against state gambling enforcement — but only as long as the preemption argument survives court challenges and congressional scrutiny.
Legislation has been introduced from both sides. Senators John Curtis (R-Utah) and Adam Schiff (D-California) introduced the "Prediction Markets Are Gambling Act" on March 23, 2026, which would amend federal law to prohibit sports and casino-style event contracts from being offered on CFTC-regulated platforms. A companion bill was introduced in the House by Representatives Steven Horsford (D-NV) and Mark Amodei (R-NV), both representing Nevada — a state with significant gambling industry tax revenue.
No committee vote has been scheduled for either bill as of July 31, 2026. The bipartisan sponsorship is notable: the traditional sports betting industry, which includes major operators like FanDuel and DraftKings and generates substantial state tax revenue, has lobbied aggressively against prediction market platforms' expansion into sports.
The prediction market sector has grown from a niche financial product into a multi-billion-dollar industry in under 18 months. That growth has exposed an unresolved legal question: whether event contracts — particularly those tied to sports outcomes — are financial derivatives or gambling products. The CFTC and nine state governments are litigating this question in federal court. Forty-four state attorneys general have formally challenged the CFTC's jurisdictional claims. New York has opened the largest single-state enforcement action.
The economic stakes are significant. States collectively earn approximately $20 billion annually in gambling-related tax revenue, according to American Gaming Association data, and prediction market platforms currently pay none of it. From the federal perspective, the CFTC's authority over event contracts — and the preemption doctrine that supports it — underpins the regulatory framework that Kalshi, Gemini, and incoming applicants like Binance.US are building their businesses on.
The resolution path is narrow. Either Congress passes legislation clarifying jurisdiction — which the bipartisan but stalled "Prediction Markets Are Gambling Act" attempts to do — or the question reaches the Supreme Court through a circuit split in the ongoing federal-state litigation. Until then, prediction market platforms operate in a legal gray zone: federally licensed, state-contested, and processing billions of dollars monthly.