US federal courts produced conflicting rulings on whether the Commodity Exchange Act (CEA) preempts state gambling laws as applied to event contracts traded on CFTC-regulated designated contract markets (DCMs). On 27 July 2026, US District Judge Katherine Menendez in Minnesota issued a preliminary injunction preventing the State of Minnesota from enforcing SF 3432 against Kalshi and Polymarket US. The Third Circuit had previously affirmed a preliminary injunction for Kalshi against New Jersey on 6 April 2026.
The preemption argument rests on CEA Section 22 and the Supremacy Clause of the US Constitution. Petitioners argue that the CEA grants the CFTC exclusive jurisdiction over event contracts listed on DCMs, displacing state gambling prohibition statutes. The CFTC filed amicus briefs asserting exclusive federal jurisdiction in the Sixth Circuit on 12 May 2026 (CFTC Press Release 9230-26) and in the Massachusetts Supreme Judicial Court (CFTC Press Release 9219-26). The Ninth Circuit is hearing consolidated cases involving Kalshi, Robinhood, and Crypto.com against the Nevada Gaming Control Board.
CFTC-licensed prediction market operators, including Kalshi, Polymarket US, and Robinhood's event contract platform, face state enforcement risk in jurisdictions not yet subject to a federal injunction. State gaming regulators in Minnesota, Nevada, New Jersey, Connecticut, Arizona, and Illinois are parties to active proceedings. Online sports betting operators holding state gaming licences are monitoring outcomes, as a definitive preemption ruling could alter the boundary between CFTC-regulated event markets and state-licensed gambling operations.
The CFTC published a separate Notice of Proposed Rulemaking on 12 June 2026 (Federal Register Document 2026-11854) on public interest determinations for prediction market contracts. If finalised, the rulemaking could strengthen the CFTC's preemption arguments across active litigation. No circuit court has issued a final merits ruling on preemption. The Prediction Markets Are Gambling Act, introduced by Senators Curtis and Schiff on 23 March 2026 to reclassify event contracts as gambling outside CFTC jurisdiction, has not advanced beyond introduction.
Licentium advises operators, investors, and platforms in the prediction market and event contract sector. Work we undertake includes CFTC DCM registration analysis, CEA compliance advisory, event contract regulatory structuring, state gaming law intersection analysis, and prediction market licensing strategy.