Trump defends prediction markets as U.S. states fight sports betting on those platforms
U.S. President Donald Trump has publicly defended the prediction market industry at a time when the conflict in the United States is intensifying between federal regulators and states that are trying to treat such platforms as a form of prohibited or insufficiently regulated gambling. According to a Guardian report, Trump criticized efforts by individual states to restrict or ban the operation of platforms such as Kalshi and Polymarket, especially when they offer contracts linked to sports outcomes. His intervention fits into a broader shift in federal policy toward stronger protection of these markets, which their operators describe as financial products under federal supervision, while state regulators increasingly view them as classic bets. The dispute is not only about sports, but also about who has the final say in the U.S. system: the federal Commodity Futures Trading Commission or state regulators responsible for gambling.
Prediction markets allow users to buy and sell contracts whose value depends on the outcome of future events. These can include elections, economic indicators, geopolitical decisions, weather events, but increasingly also sports results. For supporters of the industry, this is a form of trading in event contracts, that is, instruments that can also serve to assess the probability of future outcomes. For critics, especially in states with more restrictive betting rules, the difference between such contracts and sports bets becomes increasingly thin when users are offered the possibility of putting money on the winner of a match, the result of a competition or combinations of outcomes similar to parlay bets.
Federal oversight against state gambling rules
The central legal point of the dispute is the claim by the U.S. Commodity Futures Trading Commission, known as the CFTC, that it has exclusive jurisdiction over U.S. commodity derivatives markets, including event contracts that are often publicly referred to as prediction markets. In February 2026, the CFTC announced that it had filed a brief before the U.S. Court of Appeals for the Ninth Circuit confirming its position on federal jurisdiction over these markets. In April, the same agency took additional legal steps against several states, stating that state attempts to apply gambling laws to registered platforms intrude into an area governed by federal law.
According to CFTC statements, in April 2026 the agency sued Arizona, Connecticut and Illinois over actions against CFTC-registered contract markets, and then Wisconsin over state lawsuits against the platforms Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase. The CFTC also filed a brief in Massachusetts in which it again emphasized that oversight of U.S. derivatives markets, including event contracts, is a matter of federal jurisdiction. Such an approach shows that the regulatory dispute is no longer reduced to individual proceedings against one platform, but to a systemic conflict between the federal interpretation of financial law and the state interpretation of gambling regulations.
The states, on the other hand, argue that platforms cannot invoke financial regulation if, in practice, they offer users products that resemble sports betting. State regulators warn that sports betting in the U.S. is subject to special licenses, age restrictions, responsible gaming rules and tax oversight. If sports outcomes move to prediction markets, critics argue, this could lead to the circumvention of a system that has been built for years after the legalization of sports betting in numerous states. That is precisely why state proceedings often repeat the argument that behind the name "event contract" lies an economically very similar act: putting money on an uncertain outcome.
Minnesota opened the most far-reaching conflict
Minnesota has attracted particular attention, becoming in May 2026 the first U.S. state to pass a law aimed at banning prediction markets. According to reports by local media and public radio MPR News, the ban is part of a broader public safety bill package signed by Governor Tim Walz. According to available information, the law is expected to enter into force on August 1, 2026, and provides criminal penalties for operating or assisting in the operation of such markets in Minnesota.
Shortly after the law was signed, the CFTC filed a lawsuit to prevent its enforcement. According to a CBS News Minnesota report, the federal agency is asking the court for a preliminary injunction that would stop the law from taking effect, arguing that Minnesota cannot criminalize activities that, according to the CFTC's interpretation, are under federal oversight. Minnesota has thereby become the most visible test of the boundaries of state and federal authority in this area. The outcome of that dispute could also affect other states that are considering similar restrictions or are already conducting proceedings against prediction markets.
Trump's criticism of state regulatory efforts has further politicized the dispute. According to the Guardian, the president sharply attacked opponents of the industry and stated that the CFTC should retain the main regulatory role. Such a message comes at a time when some states are invoking consumer protection, addiction prevention and the integrity of sports competitions, while the federal regulator and the industry emphasize innovation, market liquidity and uniform rules at the national level.
Why sports contracts are an especially disputed area
Sports event contracts are at the center of the debate because they are the most recognizable to the public and the closest to classic betting. In traditional sports betting, a user puts money on the outcome of a match or competition, and the offer is regulated by state licenses and rules for operators. On prediction markets, at least according to the interpretation of their operators, users trade contracts that move toward a value tied to the outcome of an event. In practice, however, the economic effect for the average user may look very similar: profit or loss depends on whether a particular sports outcome occurs.
The Financial Times reported that the industry is increasingly moving closer to traditional forms of sports betting, among other things through products resembling combined bets. According to that report, on Kalshi the so-called "combo" transactions reached very large nominal volumes in mid-May, with sports outcomes playing an important role. Such development strengthens the argument of state regulators that prediction markets can no longer be viewed only as niche financial instruments for political or economic forecasts. At the same time, the industry claims that liquid and centrally supervised markets can provide more transparent probability prices than unregulated or foreign platforms.
An additional problem for regulators is the fact that prediction markets are rapidly expanding across the boundaries of traditional categories. If one and the same legal framework applies to contracts on inflation, elections, weather events and sports results, the question arises whether all these products should be treated equally. States believe that sports outcomes carry specific risks, including the possibility of problem gambling, an impact on the integrity of competitions and the availability of products to users in jurisdictions where sports betting is not permitted or is strictly restricted. The federal approach, on the other hand, emphasizes that fragmented state rules could prevent a unified market of registered event contracts.
Kalshi, Polymarket and the expansion of the industry
Kalshi and Polymarket have become the best-known symbols of the new wave of prediction markets, although their business models and regulatory status are not completely the same. Kalshi operates as a CFTC-registered contract market, while Polymarket is known for its crypto infrastructure and global user base. In public debate, the two platforms are often mentioned together because they enable trading in event outcomes and because they have come under the scrutiny of state and federal regulators. According to CFTC statements, larger financial or technology platforms such as Coinbase, Crypto.com and Robinhood are also mentioned alongside them in disputes.
The growth of the industry has also opened questions about market transparency, user oversight and possible abuses of privileged information. In February 2026, the CFTC issued an advisory statement after the publication of cases related to the misuse of non-public information and fraud in connection with certain event contracts traded on KalshiEX. The agency thereby acknowledged that, even if it considers event contracts part of the financial market, such products require strict enforcement of rules against manipulation and fraud.
Integrity issues are especially sensitive when contracts relate to events about which individuals may have privileged information. This can include political decisions, regulatory moves, military or security events, but also sports information such as injuries, team lineups or internal club decisions. Critics argue that the mass expansion of prediction markets increases the incentive to misuse information. Supporters, however, respond that regulated markets, with transaction oversight and user identification rules, can better detect suspicious patterns than informal or foreign betting environments.
The political dimension and a possible conflict of interest
Trump's defense of the industry also has a political dimension because prediction markets are increasingly linked to election forecasts, public opinion and the broader digital economy. According to the Guardian, Trump and members of his family have been linked to business interests in the prediction market sector, including products connected to his media company and his son's contacts with major players in the industry. Such information further strengthens criticism that regulatory policy is not viewed only through the technical question of jurisdiction, but also through possible political and business interests.
For now, it has not been officially confirmed that the Trump administration will change the fundamental legal framework for prediction markets, but the CFTC's actions already show a clear regulatory line. The agency, under Chairman Michael Selig, defends the position that states should not individually restrict registered event contracts if they are within the federal oversight system. State officials, including those from Minnesota and other states that have initiated or supported restrictions, believe that such an approach undermines their authority to protect residents from unlicensed gambling.
The political weight of the dispute is further increasing because sports betting in the U.S. is managed mainly at the state level. After the 2018 U.S. Supreme Court decision that opened the way for states to legalize sports betting themselves, different local licensing and taxation models developed. Prediction markets now open the possibility that sports outcomes may be offered through the federal financial regulator, outside the traditional infrastructure of bookmakers. This is why the sports betting industry, state budgets and regulatory agencies are directly involved in the same debate.
What court decisions could change
The outcomes of proceedings in Minnesota, Arizona, Connecticut, Illinois, Wisconsin, Massachusetts and other states could determine whether prediction markets in the U.S. will operate as nationally regulated financial products or will have to adapt to the rules of each individual state. If courts accept the CFTC's argument on federal supremacy, platforms could receive a significantly more stable legal framework for expanding their offerings, including sports contracts. If courts give priority to state gambling rules, operators could face a mosaic of bans, licenses and restrictions that would slow down or change their business model.
For consumers, the consequences could be direct. One scenario implies broader availability of platforms that offer trading in event outcomes, under CFTC oversight and financial market rules. The other scenario brings a greater role for state regulators, stricter local conditions and possible bans on sports contracts in states that consider them betting. In both cases, the question remains open of how to clearly distinguish financial innovation from a product that, for a large number of users, functions as a bet.
At present, the only thing certain is that the legal and political battle is accelerating. The CFTC continues to defend federal jurisdiction, Minnesota and other states are trying to retain control over products they consider gambling, and the Trump administration is publicly showing favor toward an industry that is expanding rapidly. Until courts provide clearer answers, prediction markets will remain one of the most disputed areas at the intersection of financial regulation, sports betting, technology and politics in the U.S.
Sources:
- The Guardian – report on Trump's defense of prediction markets and criticism of state regulators (link)
- Commodity Futures Trading Commission – statement on federal jurisdiction over prediction markets before the Ninth Circuit (link)
- Commodity Futures Trading Commission – lawsuits against Arizona, Connecticut and Illinois in connection with event contracts (link)
- Commodity Futures Trading Commission – brief in Massachusetts on jurisdiction over prediction markets (link)
- Commodity Futures Trading Commission – lawsuit against Wisconsin in connection with the platforms Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase (link)
- Commodity Futures Trading Commission – advisory statement on the misuse of non-public information and fraud in prediction markets (link)
- MPR News – report on Minnesota's legislative proposal to ban prediction markets (link)
- CBS News Minnesota – report on the CFTC lawsuit against Minnesota and the date the law enters into force (link)
- Financial Times – analysis of prediction markets moving closer to traditional sports betting (link)