Attorney General Jennifer Davenport signed a letter Thursday pushing federal financial authorities to grant states the authority to regulate sports-related prediction markets as states wrestle for influence over the booming sector.
The U.S. Commodity Futures Trading Commission currently regulates prediction markets, which allow users to buy contracts on various subjects, including political and sports results. A customer can purchase contracts at a certain rate — say, 25 cents for an underdog football team to win — and if correct, they are paid a dollar for each contract.
But states say that such markets constitute sports betting, giving them, not the CFTC, the legal authority to regulate the practice. Davenport and attorneys general from 40 other states penned a letter to the commission arguing as such, demanding the CFTC “recognize the limits of its power” and allow states to step in.
The CFTC has long regulated contract-based financial markets, particularly those used by investors for financial risk management. But the attorneys general argue that certain contracts featured in online prediction markets don’t qualify as serious risk management opportunities — instead, Davenport’s office said it’s “entertainment-based gambling.”
“Any distinction between sportsbook bets and prediction-market bets is illusory,” the letter argues. “Examples prove the point. On so-called ‘prediction markets,’ users can make all the same wagers they can make at a traditional sportsbook. What team will win a game. The potential spread of a game. The total number of points in a game, and ‘prop’ bets—asking how many points, rebounds, or some other statistic for each player. The same bets are made on sportsbooks.”
Because users trade contracts with each other, not with the platform, prediction markets argue that they are distinguishable from sportsbooks, where players place bets “against the house.” Prediction markets like Kalshi primarily make money off transaction fees, meaning they build revenue regardless of an event’s outcome.
New Jersey co-led the letter, as did Ohio, Nevada, New York, Tennessee, and Utah.
The CFTC appears unlikely to acquiesce. On Friday, its chairman, Michael Selig, criticized a Wall Street Journal essay that condemned prediction markets as “Gambling by Another Name.” Selig said his commission “holds exclusive authority” over prediction markets.
“While some may harbor skepticism about innovative financial products, we firmly stand by our jurisdiction and remain committed to protecting it,” Selig wrote. “These markets provide significant benefits to individuals, businesses, and the broader economy, and we will continue to ensure their integrity and growth.”
Jack Such, a spokesperson for Kalshi, the country’s largest online prediction market platform, told the New Jersey Globe that because of ticket sales, player and TV contracts, merchandise, and more, sports results have “second-order effects” on the economy that justify the use of prediction markets.
“The notion that sports, an unrivaled cultural and commercial phenomenon in America, somehow do not affect the economy, and therefore should not qualify as an event contract, is not a notion that is rooted in logic or fact,” Such said.
Many states have taken action against platforms like Kalshi and Polymarket, accusing them of implementing de facto gambling operations without acceding to gambling regulations or tax policy. More than 20 states have filed civil suits against Kalshi, and Arizona’s attorney general filed criminal charges against the company. A judge in Nevada has temporarily blocked Kalshi from operating within the state.
Kalshi secured a key legal victory last month after a New Jersey-based federal appeals court ruled that the company could continue its sports operation, as New Jersey regulators seek to challenge the practice. The panel, in a 2-1 ruling, found that the CFTC likely has exclusive jurisdiction over these prediction markets.
New Jersey’s sports gambling market has burgeoned since a 2018 Supreme Court ruling in Murphy v. National Collegiate Athletic Association — named for former Gov. Phil Murphy — granted states the broad authority to regulate sports gambling as they see fit. The Garden State’s casinos and racetracks reported $1.18 billion in sports wagering revenue in 2025, according to state data, and the state collected more than $200 million in tax revenue from sports wagering in that span.
But many states with booming sports gambling industries have also noticed an increase in gambling addiction and bankruptcy rates, particularly among young men, and many states have invested in gambling addiction resources in the years since. If the CFTC maintains its control over sports-related prediction markets, the states worry their progress might be undone.
“Without careful regulation, it can present real problems for the States’ citizens. In fact, most evidence shows that gambling can affect a person’s health and financial security, and increase the odds of criminal behavior,” the letter says. “States are best positioned to regulate gambling and protect their populations from these potential harms. The CFTC is not.”
