What Is the 39-State Coalition Against Prediction Market Sports Betting?

A coalition of 39 US states is challenging the CFTC's authority to approve sports-related prediction market contracts, arguing that these products are functionally gambling products that fall under state regulatory jurisdiction regardless of their federal derivatives classification. Idaho joined the coalition in March 2026, bringing the total to 39 states — a broad, bipartisan alliance of state regulators resisting federal expansion into what they view as their regulatory domain.

Background: The Federal-State Jurisdiction Dispute

The core question is simple but consequential: who regulates event-based wagering — the CFTC as derivatives or states as gambling?

Prediction market platforms like Kalshi operate as CFTC-registered Designated Contract Markets (DCMs). This federal designation authorizes them to list and trade event contracts nationwide. States have traditionally regulated gambling through their own gaming commissions and lottery boards.

When prediction markets were limited to political and economic events, the jurisdictional question was mostly academic. But when federal courts cleared Kalshi to offer sports-related event contracts, the dispute became urgent. State gambling regulators and the licensed gambling industry viewed sports prediction markets as unregulated competitors operating in their domain.

How the Coalition Formed

The coalition grew through several phases:

Phase 1: Individual State Actions (2025)

Nevada's Gaming Control Board was among the first to act, restricting Polymarket and other unlicensed prediction markets from operating within the state. Other states with strong gambling regulatory frameworks — New Jersey, Pennsylvania, Michigan — began examining their authority.

Phase 2: Formal Coalition (Early 2026)

States coordinated through the National Council of Legislators from Gaming States and direct regulatory channels. The coalition's legal argument centers on the Tenth Amendment and the principle that states have traditionally regulated gambling within their borders, and no federal statute expressly preempts this authority for prediction market contracts.

Phase 3: Expanding Membership (March 2026)

Idaho's addition brought the coalition to 39 states. The broad membership — including states that have legalized sports betting, states that haven't, and states with varied political orientations — demonstrates that this is a regulatory jurisdiction issue, not a partisan one.

The Coalition's Legal Arguments

1. Functional Gambling Test

The coalition argues that prediction market sports contracts meet every functional definition of gambling: a participant pays money, the outcome depends on a future uncertain event, and the participant receives a financial return if the outcome occurs as predicted. Federal classification as a "derivative" doesn't change the underlying economic activity.

2. No Express Federal Preemption

The Commodity Exchange Act does not contain language expressly preempting state gambling laws. The coalition argues that CFTC regulation of derivatives and state regulation of gambling can coexist — a platform can be both a DCM and subject to state gambling requirements.

3. Historical Precedent

States have regulated gambling for over a century. Sports betting specifically was restricted by PASPA (Professional and Amateur Sports Protection Act) until 2018, when the Supreme Court struck it down — not on federal preemption grounds, but because PASPA improperly "commandeered" state legislatures. The Court's ruling actually affirmed states' authority to regulate sports betting.

4. Consumer Protection

States argue they have a legitimate interest in protecting residents from unregulated gambling products. State gambling regulations include responsible gambling requirements, self-exclusion programs, age verification, and anti-money laundering measures that CFTC derivatives regulation does not replicate.

What Prediction Market Platforms Argue

Kalshi and other platforms counter that:

• CFTC designation as a DCM provides comprehensive federal oversight
• State gambling laws were not designed for regulated derivatives markets
• Requiring state-by-state gambling licenses would effectively destroy the prediction market industry
• The CFTC has exclusive jurisdiction over designated contract markets under the Commodity Exchange Act

Potential Outcomes

Scenario 1: States Win

Prediction markets must obtain state gambling licenses to offer sports contracts. This dramatically increases compliance costs and fragments the market. Licensed sportsbook operators gain a competitive advantage.

Scenario 2: Federal Preemption

Courts rule that CFTC designation preempts state gambling laws. Prediction markets can operate nationwide without state gaming licenses. Traditional sportsbooks face new, less-regulated competition.

Scenario 3: Legislative Compromise

Congress passes legislation creating a hybrid regulatory framework — federal oversight of market structure with state-level consumer protection requirements. This is the most likely long-term outcome but would take years to implement.

What This Means for iGaming Operators

The coalition's success would directly benefit licensed iGaming operators by:

• Eliminating a less-regulated competitor or forcing that competitor to obtain the same licenses
• Validating the value of state gaming licenses as barriers to entry
• Creating partnership opportunities as prediction markets seek licensed partners for state-level access

Even if the coalition doesn't fully succeed, the pressure it exerts is pushing prediction markets toward more gambling-like regulation — which narrows the competitive gap between prediction market platforms and licensed operators.

Frequently Asked Questions

Which states are in the coalition?

The coalition includes 39 states as of March 2026. The full membership list is not always publicly disclosed, but confirmed participants include Nevada, New Jersey, Idaho, and multiple other states with active gambling regulatory frameworks.

Does the coalition want to ban prediction markets?

No. The coalition's position is that prediction market sports contracts should be subject to state gambling regulation — not that they should be prohibited. States that have legalized sports betting could license prediction market platforms to operate within their borders.

How long will this legal battle take?

The jurisdictional question may take 2-3 years to resolve through litigation, and longer if it requires Congressional action or a Supreme Court ruling. In the meantime, individual states will continue pursuing their own enforcement actions.