Betting jurisdictions brace for predictions markets

When Kalshi and Polymarket launched their prediction markets in the early 2020s there was immediate reaction by several countries, including the United States, questioning whether they were operating illegally.

Legal wranglings in the U.S

Polymarket chose not to apply for any regulatory license so in 2022 the United States Commodity Futures Trading Commission (CFTC) fined Polymarket $1.4 million in 2022 for regulatory violations. Polymarket paid the fine and agreed to no longer operate in the U.S., blocking anyone with an American mailing address or IP from using their site. Kalshi, unlike Polymarket, attained a license in 2020 from the CFTC to offer prediction markets, with yes/no options on closing prices of gold, silver, etc., as well as questions of interest like whether there would be a recession. But Kalshi got in trouble with the CFTC in 2022 when they started offering prediction markets on election results and other political events. The CFTC issued a cease-and-desist order against Kalshi saying that unlike the other contracts these were not markets in public interest and violated CFTC rules. In their order the CFTC said that these contracts were not only a form of gambling, but could skew the election results.

Consequently the CFTC blocked Kalshi from offering event contracts on election results and Kalshi sued the CFTC for overstepping its boundaries.

In 2024, a D.C. District Court ruled that the CFTC indeed overstepped its authority and said that what Kalshi was doing was legal. The CFTC appealed the decision. While this legal wrangling was going on Kalshi and Polymarket were all over the news as the media highlighted the two prediction market percentages and compared it with what the polls were showing. In the end the two prediction market sites turned out to be more accurate than polls or gambling sites that offered odds on elections, because while the polls and odds at gambling sites often showed Kamala Harris as the likely winner of the 2024 U.S. Presidential election, the percentages (i.e. the percentage of people who predicted a Trump win) never moved much at the prediction sites, which consistently showed that Trump would not only with the presidency but also the popular vote and majority of votes in the swing states. The prediction sites said that when there is real money on the line, it provides a more accurate reflection of the truth than polls which can be manipulated and which have no material consequences, and for that reason, what they offer is in the public interest.

In May 2025 the CFTC dropped its appeal against Kalshi thus allowing the company to continue operating unfettered, pending appeal. Kalshi in turn decided to push the envelope and offer contracts on sporting events, which even the biggest defenders of the company had to admit was a form of gambling. Nevertheless, they proceeded with the plan which not only brought Polymarket back into the U.S. but also had major sports betting sites like DraftKings, FanDuel and BetFanatics announcing they would launch prediction market sites as well to compete. Spokespeople for two of the sites said they are doing so out of necessity rather than want. But to their advantage, because prediction markets are deemed a form of commodity trading, they are legal in all states, including those that have not only blocked online gambling, but all gambling, namely Utah, Hawaii and Alaska. So initially FanDuel only launched its prediction markets in states they didn’t have a sportsbook license but they expanded it to the whole country as DraftKings, BetFanatics and Kalshi did.

States regulate gambling

Not surprisingly, in March 2025 many states issued cease-and-desist orders against Kalshi, which was the only company offering prediction markets at the time, but federal courts issued injunctions against those orders allowing Kalshi to operate until a final decision was made.  It appeared the states would have a hard time winning their orders but in November a federal judge lifted the injunction and ordered Kalshi to stop offering contracts in the state. Kalshi appealed this ruling and this week the 9th circuit court of appeals upheld the judge’s November ruling, thus requiring Kalshi to stop offering its prediction markets in Nevada. It should be noted that while the decisions were against Kalshi, Nevada has issued similar lawsuits against Polymarket, Coinbase and Crytpo.com. FanDuel and DraftKings which were operating prediction sites in Nevada chose to leave the market rather than being dragged into a suit.

While it seems likely the 9th Circuit will rule against Polymarket as it did Kalshi, the one specific lawsuit that is really drawing attention relates to Crypto.com, a Singapore based cryptocurrency exchange that launched a prediction market site early in 2025. In May, the Nevada Gaming and Control Board issued a cease-and-desist order against them too and though Crytpo.com agreed to stop operating in Nevada pending a 9th Circuit Court in April, Crypto.com is proabably hoping that its connections with Donald Trump may help them win the case and possibly even be deemed unquestionably legal everywhere in the United States. Not only was Crytpo.com a large donor to Trump causes, they also have a partnership with Trump Media & Technology Group to integrate the Crytpo.com wallet into Truth Social. In October  of 2025, Trump Media announced it was launching Truth Predicts, which will allow everyone to bet on election results via TruthPredicts.com and presumably would allow prediction markets on sports and current events as well. So if the 9th Circuit rules against Crytpo.com as it did Kalshi, then there’s little doubt that the DOJ and likely the GOP controlled SCOTUS would get involved to protect the Trump Organization’s interests. That in turn could effectively make prediction markets legal everywhere with no further recourse and would devastate the sports betting industry in the country, including Nevada. So it’s quite possible that the 9th Circuit Court may work with Nevada to somehow find a way to make Crypto.com and/or Truth Predicts prediction markets legal while deeming other prediction markets sites are illegal. Many analysts believe that Crytpo.com will simply abandon its prediction markets and put all its focus into Truth Predicts and take a cut of the profits.

Future of Prediction Markets Worldwide

One question that arises, however, is what does it all mean to other countries? While prediction markets are clearly the rage right now in the U.S. and reports show they are far surpassing traditional sportsbooks in terms of interest and media coverage, almost every other democratic country allows sports betting and doesn’t want to jeopardize that revenue, so they have to determine what to do with prediction markets.

This week the UK Gambling Commission seems to have resolved the issue in the UK when Brad Enright, the UKGC’s director of strategy, wrote a blog which said that the UKGC would almost certainly treat prediction markets the same way it does betting exchanges, meaning that any prediction site would need to acquire a gambling license to operate as Betfair, Betdaq, Matchbook and others have. Enright also said that it would have to agree not only to pay taxes and license fees, but also to agree to UKGC standards, which would certainly allow markets on elections but may not allow markets that have caused controversy, like the number who would be killed in the Gaza war or when Maduro would be captured by the United States.

As for the EU, most countries have said that they deem prediction markets as an illegal, unregulated, form of gambling and operators could face arrest if they launched the product there. The clear definition of gambling in the EU is wagering something of value to win something of greater value in the future.

Canada’s position on prediction markets is as clear as mud. Canada doesn’t have a federal securities or gambling regulator like the U.S. does, so it comes down to the provinces.

I spoke with Peter Czegledy, a Canadian corporate lawyer specializing in sports and regulated industries, including gambling law, and asked what he believes will happen in Canada. This was his response:

"At this time both the Canadian gaming and the Canadian securities regulatory authorities are grappling with how best to address prediction markets within their existing regulatory frameworks, including considering what modifications should be made to them to more clearly and directly deal with both the opportunities and issues they pose. However, one should expect more to come. This is a very active and in-progress file, and we can expect new or refined policies to be expressed relatively soon. There are several possible solutions that could be implemented, so trying to predict which one will be selected is a bit foolhardy. As you might guess, there are advocates for each approach, in many instances reflecting their particular business interest bias."

Czegledy pointed to a 2017 Ontario Securities Commission document on binary options which still would hold today. In that document it states: “No person or company may advertise, offer, sell or otherwise trade a binary option with or to an individual."

And a binary option is defined as: A contract or instrument that provides for only
(a) a predetermined fixed amount if the underlying interest referenced in the contract or instrument meets one or more predetermined conditions, and
(b) zero or another predetermined fixed amount if the underlying interest referenced in the contract or instrument does not meet one or more predetermined conditions.

So, more than likely if the courts use that guidance they would rule prediction markets fall under this category and would thus make what Kalshi and Polymarket are doing illegal. Of course, the provinces could avoid this by declaring prediction markets a form of gambling requiring a Betting Exchange license, including a 20% tax on profits and a $100,000 annual license fee, as it does with all gambling sites. And if it does so, most likely would dissuade prediction market sites from ever applying for a license, since so far they are adamant that they are no different than a commodities exchange and they don’t want to provide any fodder to U.S. states that want them deemed illegal gambling.

Kalshi currently says it operates in 130 countries and Polymarket in 180 countries and each are either fully restricted or have chosen not to operate in approximately 40 countries each including Australia, Canada, UK, France, Germany, Italy, Portugal, Hungary, Belgium, Russia, China, Singapore, Taiwan and Thailand along with other smaller countries where they believe they could get into trouble with the law if they do operate.

For other EU, South/Central American, African and Asian countries they are operating in a grey market but like offshore gaming sites, they are prepared to offer their products there until they get into trouble with the country’s authorities, at which point they’ll decide how to proceed.

So, clearly prediction markets are causing confusion everywhere. If they only offered contracts on the closing price of oil or gold few would take notice. But the decision to get involved in election results, and current events including what would normally be called bets in bad taste, as well as sports betting, changes everything. The issue is not going to go away so it’s imperative for the governments to rule ASAP, especially because prediction markets are so lucrative. The Financial Times just indicated that in fiscal 2025 Kalshi generated almost $1.3 billion in revenue from sportsbooks which is about 10% of the total sportsbook revenue in the U.S. for the same period. But unlike DraftKings, FanDuel, BetMGM etc. the states make nothing on it since Kalshi doesn’t pay a licensing fee or revenue on its income to states. That is not only causing states to cry foul but is also affecting the stock price of sports betting companies. Unfortunately, it seems the states may be impotent to do anything about it either because prediction market sites are federally regulated and the Trump Organization’s decision to get into the game could force rulings by courts that don’t upset the U.S. president.

But what it all comes down to is whether prediction markets trading is a contract in the public interest or a form of gambling. If you ask most countries outside the U.S., as well as gaming analysts, they would say it’s clearly a form of gambling. But sites like Kalshi and Polymarket would argue the opposite. It ceratinly is a contentious issue and unfortunately for sports betting companies that put a lot of time, effort and money to launch legal sports betting in the United States after SCOTUS repealed PASPA in 2017, it wasn’t an issue they likely would have even envisioned, let alone worried about.

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