Iowa
State Officials Challenge Federal Overreach as Online Prediction Markets Skirt Gambling Laws
CHICAGO — The escalating feud between states and online prediction markets was on full display at a summit of state lawmakers this week as legislators publicly scolded Kalshi and Polymarket, the two most prominent platforms. Prediction market platforms say they…
Last updated:
Key points
- State lawmakers and 44 attorneys general are challenging online prediction markets for attempting to bypass state gambling regulations under federal CFTC oversight.
- Platform operators argue they fall under federal commodity rules, while state officials emphasize constitutional state sovereignty over gambling and consumer protection.
- Legal experts anticipate the jurisdictional conflict between state gaming authorities and federal agencies will ultimately be decided by the U.S. Supreme Court.
CHICAGO NewsWK — State lawmakers across the nation are mounting a defense of state regulatory authority against online prediction platforms like Kalshi and Polymarket, arguing that the companies are using federal regulatory claims to bypass state gambling laws and consumer protections.
Federal Agency Expansion vs. State Sovereignty
The controversy centers on whether financial prediction markets—which allow users to trade contracts based on the outcome of real-world events ranging from political elections to sporting events—fall under federal commodity regulations or state gaming controls. The platforms contend they operate similarly to commodity exchanges regulated by the federal Commodity Futures Trading Commission (CFTC), advocating for a uniform federal framework rather than adhering to state-by-state laws.
However, state leaders assert that treating sports-related prediction contracts as financial derivatives compromises state sovereignty over gambling oversight. A coalition of 44 state attorneys general recently sent a joint letter to the CFTC, asserting that the federal agency lacks the statutory authority to pre-empt state gaming statutes regarding sports events.
Former South Carolina Congressman Mick Mulvaney, who currently serves as executive director of the Gambling is Not Investing Coalition, pointed out that constitutional traditions favor local control in this arena. “That’s been two areas where the states have almost always been entirely sovereign: That’s on booze and gambling,” Mulvaney said in comments reported by Stateline, adding that the jurisdictional dispute appears destined for the U.S. Supreme Court.
Consumer Safeguards and Youth Access Concerns
During a panel at the National Conference of State Legislatures in Chicago, state officials highlighted the real-world impact of unregulated online platforms operating outside state compliance standards. Iowa State Sen. Dan Dawson warned that high school students had accessed prediction platforms to trade on international sports matches, sidestepping state age minimums designed to protect minors.
“States are the ones that pick up the pieces,” Dawson noted during the panel, according to Stateline, emphasizing that local government bodies are left to manage public fallout while prediction markets resist basic requests for state-level operating data.
Representatives for the prediction platforms maintain that their exchanges adhere to federal anti-money laundering standards and offer self-exclusion options for individuals facing gaming problems. Nonetheless, state leaders remain focused on preserving state law, tax revenues, and existing compact agreements established with local and tribal gaming operators.
This article was produced with the assistance of AI and reviewed by our editorial team.
Based on reporting by Kevin Hardy originally published by Stateline. Read the original story.
