Why they’re legal at the federal level
Prediction market apps run on exchanges that the Commodity Futures Trading Commission (CFTC) has designated, the same category as the markets where farmers trade grain futures. Under federal rules, an exchange can list a new contract by certifying it to the CFTC itself. The CFTC can block contracts that involve gaming, terrorism, war, assassination or illegal activity if it finds them contrary to the public interest, under Rule 40.11.
Election contracts were the first big test. In September 2024 a federal judge in Washington, D.C. let Kalshi list contracts on which party would control Congress. The CFTC appealed but later dropped the appeal, so no appeals court ruled on the merits.
Under its current leadership the CFTC has swung behind these markets. On February 4, 2026 it withdrew a 2024 proposal that would have banned political and gaming contracts. On June 10, 2026 it proposed a new version of Rule 40.11 that would review contracts one by one instead of banning whole categories, while treating casino-style games as likely against the public interest. That proposal isn’t final yet.
The fight over sports contracts
States regulate sports betting, and many of them see a sports event contract as a sports bet by another name. The apps argue that federal law on CFTC-regulated exchanges overrides state gambling law. Courts don’t agree:
| Court | Date | Result |
|---|---|---|
| 3rd Circuit (New Jersey) | Apr 6, 2026 | For Kalshi, 2–1: federal law likely overrides New Jersey’s |
| 9th Circuit (Nevada) | Aug 28, 2026 | For Nevada, 3–0, against Kalshi, Robinhood and Crypto.com |
| 6th Circuit (Ohio, Tennessee) | Sep 25, 2026 | For the states |
| 4th Circuit (Maryland) | Argued May 7, 2026 | No decision yet |
When appeals courts split like this, the Supreme Court often steps in. New Jersey has asked it to hear its case (No. 26-299), with Kalshi’s response due November 9, and Robinhood and Crypto.com have filed their own petitions after losing in the 9th Circuit. As of early October 2026 the Court hadn’t agreed to hear any of them.
The CFTC has taken the apps’ side in court. It has sued Arizona, Connecticut and Illinois, New York, Wisconsin, Minnesota, New Mexico and Kentucky, and joined a case in Rhode Island.
Where apps have pulled sports contracts
These are the restrictions we could confirm from the regulators themselves:
- Nevada. A state court has enjoined Kalshi, Polymarket and Coinbase, according to the Nevada Gaming Control Board. In July 2026 Kalshi agreed to geofence its sports contracts or pay $120,000 a day. Robinhood’s own help pages say Nevada residents can’t open new sports contracts.
- Washington. A court ordered Kalshi in August 2026 to stop offering sports and several other kinds of contracts.
- Michigan. Kalshi’s sports contracts are barred by a court order, and Robinhood agreed in September 2026 to stop offering them.
- Massachusetts. A court blocked Kalshi’s sports contracts in January 2026, but that order was put on hold in February while the state’s highest court decides the case.
- Missouri. The attorney general sent cease-and-desist letters to six prediction market operators in September 2026.
Elsewhere the apps have won in federal court for now. Judges have blocked Arizona from enforcing against Kalshi and blocked Minnesota’s new felony ban, and in early October a judge partly blocked Illinois’s new rules. New York won the first round there, when a federal judge refused to block the state in July 2026.
Tribal land
Native American tribes argue that sports contracts break their exclusive gaming rights under the Indian Gaming Regulatory Act. On September 16, 2026 the 9th Circuit agreed that sports contracts placed from tribal land are likely gaming covered by that law, according to law-firm write-ups of the ruling (we haven’t been able to read the opinion itself). Tribes in California, Wisconsin and New Mexico have sued Kalshi and Robinhood.
What Congress is doing
Several bills would change things, including the Prediction Markets Are Gambling Act (S.4160), which would ban sports and casino-style contracts, and the Prediction Market Act of 2026 (S.4469). None has passed.
What this means for you
If you trade economics, weather, politics or culture, you can use any of the four apps we review in almost every state. If you want sports, check the app before you deposit, because the rules can change within weeks as court rulings land. Our reviews list each app’s confirmed restrictions, and we update this page when the courts move.
This page explains the law in general and isn’t legal advice.