Yes. As of August 1, 2026, this has become a substantial state–federal fight.

States challenging prediction markets

The states that have taken significant legal or regulatory action against Kalshi and/or Polymarket include:

Arizona, Connecticut, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Ohio, Rhode Island, Tennessee, Washington, Wisconsin, Kentucky and New Mexico. The exact legal action differs—some have sued, some issued cease-and-desist orders, and some are defending themselves after the prediction-market companies sued them. CFTC+1

New York is the newest major development: on July 31, New York sued Kalshi, alleging that it is operating an illegal, unlicensed gambling operation. Reuters

What Kalshi and Polymarket say

Their central argument is quite powerful:

“We aren't bookmakers. We are federally regulated financial markets.”

Kalshi is registered with the Commodity Futures Trading Commission (CFTC). It argues that the federal Commodity Exchange Act gives the CFTC authority over its event contracts and preempts state gambling laws.

The CFTC itself has taken Kalshi's side in several of these disputes. In April it sued Arizona, Connecticut and Illinois, arguing that states cannot interfere with federally regulated prediction markets. AP News+1

Rhode Island is an especially interesting example: the state sued both Kalshi and Polymarket, while the CFTC then intervened to protect federal jurisdiction. CFTC

Who is likely to win?

My prediction: the prediction markets have the stronger argument on the federal-jurisdiction question—but probably not an unlimited victory.

The strongest reason is that the CFTC is actively asserting exclusive federal authority, rather than leaving Kalshi to fight the states alone. And federal courts have already given Kalshi important victories, including injunctions preventing enforcement in some states. LegalClarity

But there is an important complication: sports contracts look remarkably like ordinary sports betting. States can argue that Congress never intended federal derivatives law to allow a company to circumvent state gambling regulations simply by calling a bet a “contract.”

The Minnesota case illustrates the fight. A federal judge recently blocked Minnesota from enforcing its new ban on prediction markets, siding with the federal regulatory position while the litigation continues. Reuters

My best guess

I would expect something like this:

Kalshi/Polymarket win the broad federal-preemption issue, meaning states probably cannot simply say, “We don't like prediction markets, therefore they are illegal here.”

But states may win the right to regulate or prohibit particular types of contracts, especially sports betting, if courts conclude that those contracts fall within traditional state gambling authority.

And because so many states and the federal government are now fighting over the same question, the Supreme Court may ultimately have to settle it.

If you'd like, I can explain why Kalshi's legal position may actually be stronger than Polymarket's, even though both are called prediction markets.