US federal district and appellate courts have split on whether the Commodity Exchange Act preempts state gaming and consumer-protection laws applied to CFTC-regulated event contracts. The CFTC filed a civil action against the State of Wisconsin to assert exclusive federal jurisdiction, filed an amicus brief in the US Court of Appeals for the Sixth Circuit, and made a submission to the Massachusetts Supreme Judicial Court, all asserting preemption. The CFTC Enforcement Division also issued a Prediction Markets Advisory in 2026. No single appellate ruling has definitively resolved the preemption question across all circuits; litigation is ongoing.
The Commodity Exchange Act grants the CFTC exclusive jurisdiction over futures contracts, options, and event contracts traded on designated contract markets under sections 2(a)(1)(A) and 22. The CFTC asserts this regime preempts state gaming laws applied to licensed DCMs including Kalshi and Polymarket. US courts have not reached uniform conclusions. The Third Circuit held that sports-event contracts qualify as 'swaps' subject to federal oversight. The Southern District of Ohio, the District of Nevada, and the Northern District of Ohio concluded that such contracts are likely not swaps. A Maryland district court in KalshiEX LLC v. Martin, 793 F. Supp. 3d 667, 685 (D. Md. 2025), found no conflict preemption where state gaming law operated as complementary to federal law rather than in direct conflict with it.
Prediction market operators holding DCM licences, including Kalshi and Polymarket, face continuing exposure to state enforcement actions from gaming regulators and consumer-protection offices in jurisdictions where preemption has not been confirmed by a controlling court. Payment processors and financial institutions serving licensed prediction market platforms must assess their state-law exposure pending resolution of the circuit split. Individual users in states with active enforcement proceedings should monitor litigation outcomes before engaging with prediction market contracts that may be the subject of state action.
The preemption outcome turns partly on whether state law conflicts with federal law or operates as a complement to it, the distinction the Maryland court applied in KalshiEX. Some state attorneys general have stayed enforcement pending federal court outcomes. The CFTC's civil action against Wisconsin and its amicus positions in the Sixth Circuit and Massachusetts are the Commission's clearest assertion of exclusive jurisdiction to date, but no binding appellate decision uniformly upholding that position exists. Pending Sixth Circuit and Massachusetts Supreme Judicial Court rulings will set precedent for the remaining circuit-level disputes.
Licentium advises on CFTC regulatory matters, prediction market licensing, and digital asset compliance and may assist directly or through its partner network. Prediction market operators, payment service providers, investors, and exchanges assessing their state-law exposure are welcome to contact us. Work we undertake includes CFTC compliance, event contract and derivatives regulation, prediction market licensing strategy, US state gaming law analysis, and digital asset platform regulatory advisory.