Trump administration pushing aggressive expansion of sports betting

The Trump administration has stepped into a consequential legal battle involving prediction market companies Kalshi and Polymarket, aligning itself with the firms in a dispute that could transform the regulation of sports wagering across the United States.

At the center of the controversy is whether contracts that allow users to bet on sports outcomes and other future events should be treated as federally regulated financial instruments or as gambling activities overseen by individual states. The federal government’s intervention, led by newly appointed Commodity Futures Trading Commission chairman Michael Selig, signals strong backing for the prediction market industry as it pushes back against states attempting to block the platforms from operating within their borders.

If Kalshi and Polymarket ultimately prevail in court, the ruling could substantially curtail states’ power to regulate sports betting and potentially permit prediction markets to function nationwide — even in jurisdictions where traditional gambling is prohibited.

Why Washington Is Stepping In

The Commodity Futures Trading Commission oversees commodities, derivatives and futures markets and has long claimed authority over “event contracts,” which allow traders to buy and sell positions tied to the likelihood of future outcomes. That interpretation has enabled platforms like Kalshi to offer services across all 50 states, including those that ban conventional sportsbooks.

State regulators in places such as Nevada and Massachusetts disagree, arguing that these exchanges function as unlicensed sports betting operations. Several have filed lawsuits or taken enforcement action aimed at shutting down local access to the platforms.

In a recent opinion piece in The Wall Street Journal, Selig took a firmer stance than he had during his Senate confirmation process, declaring that the CFTC would no longer stand by while states attempt to encroach on what he described as the agency’s exclusive jurisdiction. The commission has since filed a “friend of the court” brief in a pivotal appellate case, underscoring its commitment to defending prediction markets under federal commodities law.

Supporters of the industry, including John Berlau of the Competitive Enterprise Institute, argue that prediction markets provide legitimate economic value by allowing individuals and businesses to hedge risks and generate more accurate forecasts. They contend that these platforms should be regulated as financial exchanges under the CFTC, rather than treated as gambling enterprises subject to state control.

How Prediction Markets Operate

Prediction markets enable users to trade contracts linked to specific outcomes. Prices generally range from one cent to 99 cents, reflecting the market’s collective estimate of the probability that an event will occur. Participants can buy or sell positions as those probabilities shift.

While users can trade contracts tied to politics, economic indicators or even weather patterns, sports events account for the bulk of activity. Kalshi reports that roughly 90 percent of its trading volume stems from sports-related contracts, and Polymarket estimates that about half of its activity is sports-driven. Around the Super Bowl alone, Kalshi said more than $1 billion worth of contracts changed hands.

Unlike traditional sportsbooks, which set betting lines and profit from customers’ losses, prediction markets describe themselves as peer-to-peer exchanges. They generate revenue primarily through transaction fees rather than by acting as the “house.”

Nevada Lawsuit at the Forefront

The most prominent legal clash is unfolding in Nevada, long known for its established gambling oversight system. The Nevada Gaming Control Board has argued that Kalshi and Polymarket are effectively operating as unlicensed sportsbooks and has sought to halt their activities in the state.

A federal judge recently granted Nevada regulators a temporary restraining order preventing Kalshi from operating locally. The company has appealed the decision to the U.S. Court of Appeals for the 9th Circuit, prompting the CFTC to formally weigh in.

The case is widely viewed as a potential landmark in determining whether federal commodities regulations override state gambling laws when sports-related event contracts are involved.

Broader Implications

States challenging the platforms maintain that regardless of how they are structured, prediction markets function like sportsbooks and should be bound by the same licensing requirements, taxation frameworks and age restrictions. Many state-regulated gambling systems require participants to be at least 21 years old, while some prediction markets allow users as young as 18.

If the courts side with the CFTC and the exchanges, states could lose the ability to enforce those standards, potentially opening the door to sports wagering through federally regulated markets even in states that otherwise ban it.

Backers of prediction markets argue they promote transparency and risk management and differ in key ways from traditional gambling. Critics counter that wagering on sporting outcomes, regardless of the legal label, amounts to gambling in practice.

Questions About Conflicts of Interest

The administration’s involvement has also drawn scrutiny due to financial connections between President Donald Trump’s family and the companies involved. Donald Trump Jr. has invested in Polymarket through his venture capital firm and serves as a strategic adviser to Kalshi. While no allegations of illegality have been made, critics note that favorable regulatory outcomes could benefit those ventures financially.

Political Pushback

The CFTC’s position has not won unanimous support among Republicans. Spencer Cox, governor of Utah, which enforces some of the strictest anti-gambling laws in the country, ridiculed the agency’s claim of authority over sports-related contracts. In a social media post, Cox argued that these platforms amount to gambling “pure and simple,” regardless of their federal classification.

Selig has brushed aside such criticism, maintaining that federal law governs the matter and that states cannot override the CFTC’s authority. In a recent video statement, he made clear that the agency is prepared to defend its jurisdiction in court.

Source: Newsweek