The CFTC Has Now Sued Five States Over Prediction Markets; Monthly Volume Has Hit $20 Billion
In 2026 the Commodity Futures Trading Commission has filed federal preemption suits against Arizona, Illinois, Connecticut, New York and Minnesota in defense of its exclusive jurisdiction over CFTC-licensed event-contract exchanges. Monthly platform volume has grown from $1.2B in early 2025 to over $20B today.
The Commodity Futures Trading Commission has now sued five states in 2026 to block enforcement of state-level restrictions on prediction-market platforms: Arizona, Illinois, Connecticut, New York, and Minnesota. The Minnesota suit, filed May 20 in the District of Minnesota, is the most aggressive of the five because the underlying statute (SF 4760) makes platform operation a felony rather than imposing a civil penalty. The New York suit was filed days after the state alleged that Coinbase and Gemini were violating its gambling laws by listing event contracts. All five complaints ask the courts to declare that state gambling laws are "unconstitutional and invalid" if applied to derivatives listed on a CFTC-regulated Designated Contract Market.
The agency already has one preliminary-injunction win to point to. On May 5, 2026, US District Judge Michael Liburdi granted the CFTC a preliminary injunction barring Arizona AG Kris Mayes from prosecuting Kalshi under state gambling laws. Liburdi found three independent grounds for preemption: field preemption (the CFTC has exclusive jurisdiction over DCM derivatives under the Commodity Exchange Act), conflict preemption (state enforcement obstructs the regulatory regime Congress designed), and impossibility preemption (CFTC rules require open access while Arizona's statute criminalizes unlicensed wagering). The same reasoning is now driving the agency's four other state cases. At least fifteen state legislatures introduced prediction-market bills in 2026; how the courts rule on the first five suits will determine whether the rest of those bills move.
The states are not backing down. Minnesota State Representative Emma Greenman, who introduced SF 4760, told Salon the law "stops companies like Kalshi and Polymarket from offering bets in Minnesota on the outcome of events like sports, wars and political outcomes under the guise of 'prediction markets,'" and argued Minnesota "has had the authority to regulate gaming and gambling since we were a territory." AG Keith Ellison was sharper, calling prediction markets "designed to be addictive" and accusing them of "prey[ing] especially on young people and low-income folks. They help the ultra-rich get richer and the rest of us get poorer." Both lines preview the state's strongest argument: this is a gambling statute (where the state has traditional primary authority), not a securities statute (where the CFTC has primacy). The Wisconsin AG's separate lawsuit against the platforms themselves (filed April 2026) was followed by a CFTC counter-suit against Wisconsin on April 28, bringing the total number of states in active federal-preemption litigation to six when Wisconsin is counted.
Volume growth is the backdrop that explains why this fight matters now and not three years ago. In early 2025 combined monthly prediction-market trading averaged around $1.2 billion. As of this writing, monthly trades exceed $20 billion. That is a roughly 17x growth in eighteen months. With volume have come repeat insider-trading incidents: the April arrest of US Army Master Sergeant Gannon Ken Van Dyke for trading roughly $400,000 in profits on Polymarket Maduro-operation markets using classified intelligence; a recent New York Times investigation flagging more than 80 Polymarket wallets with timing patterns consistent with advance information on Iran-strike markets; and, this week, Kalshi suspending a MrBeast video editor who showed "near-perfect trading success" on markets tied to videos his employer was about to publish. The Donald Trump Jr. ties matter to the politics of the federal position but not to the underlying law: Trump Jr. is a strategic advisor to Kalshi and has invested in Polymarket through 1789 Capital, his venture firm. The Trump-led CFTC argues those connections are irrelevant to its jurisdictional claim, which rests on statutes Congress passed long before either company existed. Kalshi spokesperson Elizabeth Diana put the industry's case bluntly: "States can't ban federally regulated exchanges because doing so is a blatant violation of the constitution and federal law." Whether that holds up across all five active suits will be settled in federal court between now and the end of 2026.
Operators mentioned in this article
CFTC-regulated Kalshi
First fully CFTC-regulated US event-contract exchange.
Crypto / On-chain Polymarket
USDC-settled on Polygon. Largest prediction market by volume.
Broker (Embedded Contracts) Robinhood
Consumer brokerage offering embedded event contracts. Fastest-growing retail prediction market platform in the US.
Recent updates
Kalshi Suspends Congressional Candidate for Trading on Own Race — Senate Already Banned Members
Kalshi disclosed on August 31 that it suspended North Carolina congressional candidate Laurie Buckhout for three years and fined her $2,589 for trading on her own race — the first publicly known enforcement action against a candidate for prediction market insider trading. Kalshi said it found multiple politicians trading on races they were involved in, including former Congressman George Santos. The Senate had unanimously banned its members and staffers from prediction market trading on April 30. CNN published a major feature on September 24 documenting election officials' concerns about disinformation and insider trading risk from prediction markets as the midterms approach.
Pew Research: Prediction Market Volume Doubled May-July, Sports Now Largest Category
A Pew Research Center analysis published September 23 found that combined monthly trading volume on Kalshi and Polymarket more than doubled from May to July 2026 — rising from $26 billion in May to $53 billion in July — driven primarily by sports contracts. Sports is now the largest trading category on both platforms. During the FIFA World Cup in June and July, Kalshi's monthly sports volume reached $58 billion. Over the same period, Americans wagered roughly $40 billion at licensed sportsbooks — suggesting prediction market sports volume has approached or exceeded licensed sports betting in dollar terms.
Democrats Now 60% Senate, 90% House Favorites on Prediction Markets — Biggest Shift Since 2024
Prediction markets on Kalshi and Polymarket have moved decisively toward Democratic control of both congressional chambers in the 2026 midterms. Democrats are priced at approximately 60% to win Senate control (Republicans 40%) and roughly 90% to win House control as of September 21. Republicans had been at 80%+ in Senate control markets when the market opened in November 2024. The shift began in February 2026 following the Iran war and has accelerated through fall as rising gas prices pushed Trump's approval ratings lower. More than 500 active midterm markets are live across Kalshi and Polymarket combined.