Share 
The Trump administration is currently embroiled in a growing legal battle with states over how the prediction market industry should be regulated. On the one hand, the Trump administration views prediction market platforms as sophisticated financial derivatives and maintains that they are under the exclusive regulatory authority of the Commodity Futures Trading Commission (CFTC). On the other hand, state authorities consider the platforms as alternative forms of gambling, demanding that they operate under state gambling laws.
“It is critically important that the CFTC’s exclusive authority over Prediction Markets [sic] is maintained, and that they will thrive,” President Trump wrote on Truth Social back in May. Indeed, the administration is stepping in to make that happen.
Intervening through legal action
Prediction markets are coming under increasing scrutiny from state authorities, with a bipartisan coalition of 44 states demanding state-level regulatory rights. To this end, various states have sued the platforms for illegal gambling.
In July, New York State sued Kalshi, accusing it of operating illegally as a gambling platform and avoiding the state’s 51% sports betting tax. “My goal is to make sure that anyone operating in the state of New York follows our laws. It is that simple,” said Gov. Kathy Hochul.
In response, the CFTC has taken legal action against New York and eight other states to assert exclusive authority over the fast-growing industry. Notably, the CFTC is a federal agency headed by presidential appointee Mike Selig. The CFTC also told prediction markets to stop using moneyline odds in pricing displays to eliminate confusion for users.
Indeed, Kalshi lets users predict on events across many fields, including elections and sports. However, the company maintains that what it does isn’t gambling, instead saying that it operates as a financial exchange that lets users trade event contracts. “Just because two things touch on sports does not make both the same,” said Bobby DeNault, the head of regulation for Kalshi.
To this end, Kalshi argues that it falls under the sole jurisdiction of the CFTC. “We’ll go to court and make sure that the rule of law prevails,” DeNault said.
Conflict of interest?
Attorney Dan Wallach, who founded the first sports-betting law firm in the U.S., notes that conservatives historically prioritize states’ rights. He also noted that the CFTC’s actions are a significant departure from historic federal policy. Interestingly, the agency has previously restricted financial exchanges from trading contracts associated with sports and gaming. To this end, Wallach claims that the Trump administration’s move to shield prediction markets against state regulations is all about President Trump.
“On the third day of his current presidential term, Kalshi submitted a self-certification announcing its intention to offer and list sports event contracts on its exchanges involving the outcomes of games,” Wallach explained.
Wallach noted that the president’s son, Donald Trump Jr., has a huge stake in the prediction markets industry. He is an advisory board member for Polymarket, where his venture capital firm, 1789 Capital, is also a major investor. Additionally, he is also a paid strategic advisor to Kalshi, where his company-gifted equity shares, originally valued at $300,000, are now estimated at more than $20 million. “This is, in many ways, one of the most embraced, one of the most brazen self-enrichment schemes in U.S. presidential history,” Wallach said.
However, the Trump administration has denied these accusations. “This is the same, tired narrative that Democrats have pushed against President Trump, his family, and his administration for a decade. President Trump only acts in the best interests of the American public — which is why they overwhelmingly reelected him to this office, despite years of lies and false accusations against him and his businesses from the fake news media. There are no conflicts of interest,” White House Principal Deputy Press Secretary Anna Kelly said.
