Several U.S. states are moving to ban or block prediction-market platforms as federal regulators assert jurisdiction over the industry.
This regulatory clash creates a fragmented legal landscape for platforms like Kalshi and Polymarket. The outcome will determine whether these markets are treated as financial instruments or illegal gambling operations.
Minnesota became the first U.S. state to ban prediction-market platforms when Gov. Tim Walz (D-MN) signed a law on May 19, 2026 [1]. State officials said that these platforms function as gambling and require strict consumer-protection safeguards [3].
Similar actions have emerged in other states. In Michigan, a judge issued a temporary restraining order earlier this year blocking Kalshi from operating within the state [2]. Texas has also become a focal point of the regulatory struggle [3].
The Commodity Futures Trading Commission (CFTC) said that these platforms are not gambling operations. The agency said that prediction markets are commodity-future contracts and therefore fall under federal oversight [3]. This position contradicts the state-level view that the platforms operate without necessary local licenses.
Platforms such as Kalshi and Polymarket now face a dual-front battle. While they navigate the CFTC's federal requirements, they must also contend with a growing number of state-level prohibitions. These disputes often center on whether the platforms provide a legitimate hedging tool, or simply a way to bet on current events [3].
“Minnesota became the first U.S. state to ban prediction-market platforms.”
The conflict between state bans and CFTC claims of federal jurisdiction suggests a looming constitutional battle over the Commerce Clause. If states successfully classify prediction markets as gambling, the industry may be forced to seek individual licenses in all 50 states, significantly limiting the scalability of these platforms. Conversely, a federal victory would standardize the industry but might strip states of their ability to enforce local consumer protection laws.
