Some states want to regulate prediction markets. Should the feds let them?

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June 24, 2026 / 3:56 PM EDT

/ CBS News

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The federal government and a growing number of U.S. states are clashing over the regulation of prediction markets.The Commodity Futures Trading Commission, the federal agency that oversees prediction markets, on Tuesday filed a lawsuit against Kentucky over its efforts to crack down on Kalshi and Polymarket for what state officials allege are violations of gambling laws. Kentucky Attorney General Russell Coleman sued the prediction market platforms earlier this month, along with two other companies, alleging they offered illegal sports betting and gambling services. Including Kentucky, the CFTC has now initiated legal actions against nine states over their push to rein in prediction markets: Arizona, Connecticut, Illinois, New York, New Mexico, Minnesota, Rhode Island and Wisconsin.In its May suit against Minnesota, the CFTC is seeking to block a law that would make operating, or helping to operate, a prediction market in the state a felony. What's behind the battle for control?The legal tussles boil down to whether the federal government or the states have primary authority to oversee prediction markets, which allow users to bet on the outcome of sports, elections and many other events. The battle comes at a pivotal moment for companies like Kalshi and Polymarket, which have raised billions in venture capital, as prediction markets face scrutiny over allegations of insider trading and money laundering.The CFTC says Congress gives it exclusive jurisdiction over the regulation of derivative markets. According to the agency, the Dodd-Frank Act, a 2010 law passed in the wake of the housing crash to tighten financial oversight, expanded its authority by giving it control over swaps, a type of derivative contract.