Once the 2024 ruling established that regulated exchanges could list election contracts, the platforms turned to a far bigger prize: sports. That is where the real money in betting is — and where the fiercest legal fight of the era has broken out. Unlike elections, sports betting is already a licensed, taxed industry in dozens of states, so offering sports event contracts under federal derivatives law put prediction markets on a collision course with state gambling regulators. The result is an unresolved battle that will shape the whole industry.
How it started
Emboldened by the election win, Kalshi and other venues began listing sports event contracts — cash-settled markets on the outcome of games — and marketing them nationally, including in states with no legal sportsbook. To a state gaming regulator, a contract on who wins Sunday’s game looks a great deal like a sports bet by another name. To the platforms, it is a CFTC-regulated derivative, no different in kind from a contract on an economic figure. Both cannot be right, and the gap between those two views is what the courts are now filling.
The preemption question
The legal core of the fight is federal preemption. The CFTC’s authority over the products it regulates is exclusive, and the platforms argue that this exclusivity displaces state gambling law entirely: if a sports contract is a federally regulated derivative, a state simply has no power to treat it as a wager. States counter that these products are sports betting in substance, that Congress never meant to hand the CFTC control of the betting industry through a back door, and that state consumer-protection and gaming laws still apply. Whichever reading prevails effectively decides the question nationwide — which is why both sides are fighting so hard.
The state pushback
The response from the states was swift. Gaming regulators in a number of jurisdictions — New Jersey and Nevada prominent among them — issued cease-and-desist orders, and the platforms sued to block them. The results have been mixed, producing exactly the kind of split that eventually draws higher courts in. In New Jersey, a federal court granted Kalshi a preliminary injunction on preemption grounds, and the Third Circuit later indicated the platform was likely to succeed — a significant win. In Nevada, the early rulings ran the other way, siding with the state, with the Ninth Circuit taking a more sympathetic view of the regulator’s position. Similar disputes have surfaced in Arizona, Michigan, Ohio, Massachusetts and elsewhere, each adding to a patchwork of contradictory outcomes.
The CFTC steps in
The dispute escalated in an unusual way: the federal regulator went on the offensive against the states. The CFTC filed suit against a group of states — including Arizona, Connecticut, Illinois, New York, New Mexico, Minnesota, Rhode Island, Wisconsin and Kentucky — to assert its exclusive jurisdiction and stop them enforcing gambling law against the contracts. A federal agency suing states to defend its own turf is rare, and it signals how high the stakes are: the CFTC’s more permissive posture since 2025 has made it, in effect, an ally of the platforms on the preemption question.
Where it stands
As of mid-2026, the picture is a genuine patchwork. Sports event contracts are available in some states, restricted or blocked in others, and actively contested in a dozen more, with courts handing down conflicting decisions and orders that can change month to month. The circuit-level split — broadly favourable to the platforms in some courts, to the states in others — is exactly the setup that tends to end at the Supreme Court, and many observers expect the question of whether federal derivatives law preempts state gambling law to be resolved there. Until then, the only reliable guide is the current position where you live: see our state-by-state availability guide and the wider legality overview.
Frequently asked questions
Are sports event contracts legal in the US?
It depends on your state and is being actively litigated. On CFTC-regulated exchanges the platforms argue they are lawful federal derivatives, but several states treat them as sports betting and have pushed back. As of mid-2026 they are available in some states, restricted in others, and contested in many — check your state before trading.
What is the preemption argument over sports contracts?
The platforms argue the CFTC’s exclusive authority over derivatives displaces state gambling law, so states cannot treat a federally regulated event contract as a wager. States argue these products are sports betting in substance and remain subject to state gaming and consumer-protection law. Courts are split on which view wins.
Will the sports contracts fight reach the Supreme Court?
Many observers expect so. Federal courts have reached conflicting decisions — some favouring the platforms, others the states — and that kind of circuit split is what typically prompts the Supreme Court to step in and settle whether federal derivatives law preempts state gambling law.