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The legal tug-of-war over sports prediction markets is heating up again, and this time the federal government might actually step into the ring. Kalshi recently filed a notice in court citing comments from Michael Selig, arguing that his remarks strengthen the company’s case against efforts to block its sports-event contracts, including a challenge connected to the Ho-Chunk Nation.
The core issue is simple to ask but complicated to answer: Who gets to regulate these sports-based contracts—states and tribes, or Washington?
Kalshi gains momentum from CFTC changes
Until recently, the Commodity Futures Trading Commission had mostly stayed quiet while states and tribal governments sued companies like Kalshi. That posture now appears to be shifting. Selig said publicly that the agency has both the “expertise and responsibility” to defend its exclusive jurisdiction over event contracts.
Not long after, the CFTC officially withdrew a proposed rule that would have prohibited sports-related event contracts. It also scrapped a prior staff advisory warning about offering access to those markets during ongoing litigation. Kalshi wasted little time highlighting these developments in court. The company continues to argue that its exchange operates under federal commodities law, not state gambling statutes.
Massachusetts court pushes back
At the same time, state regulators are digging in. A Massachusetts judge recently refused to pause an injunction that would require Kalshi to stop offering sports-event contracts in the state within 30 days unless it secures a gaming license.
The court agreed with the state’s position that these contracts resemble traditional sports betting. Massachusetts regulators emphasized licensing requirements and age restrictions, pointing out that some prediction markets allow participation at 18 rather than 21.
Kalshi insists the distinction matters. The company says its products are derivatives—financial contracts regulated at the federal level—rather than sportsbook wagers.
Tribal oversight conflicts with Kalshi operations
The legal tension goes beyond state regulators. Tribal governments are also pushing back, arguing that prediction markets could undermine hard-won gaming exclusivity under the Indian Gaming Regulatory Act.
Several tribes have filed lawsuits or supported state enforcement actions. Critics say prediction platforms operate nationwide without the geofencing and compact-based oversight that tribal mobile wagering requires. That difference, they argue, creates an uneven playing field. Prediction markets counter that they operate under federal exchange licenses, not tribal or state gaming frameworks.
Federal law collides with state authority
The dispute ultimately centers on federal preemption. Kalshi and similar companies rely on the Commodity Exchange Act, which gives the CFTC authority over derivatives markets. They argue that the law supersedes state gaming statutes with respect to event contracts. States and tribes see it differently. In their view, labeling something a derivative does not automatically remove it from gambling oversight.
The legal landscape grew even more complicated after the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. That ruling reduced judicial deference to agency interpretations of ambiguous laws, meaning courts may scrutinize more closely how the CFTC interprets its authority.
