Voters cast their votes at a polling place inside John Jay High School during early voting for the primary election in Brooklyn, New York City, USA, on Sunday, June 21, 2026.
Michael Nagle | Bloomberg | Getty Images
Wisconsin spun prediction market platforms last month when the state’s election board issued a directive reminding voters that betting on elections, including trading on event contract exchanges, is illegal in the state under a more than 175-year-old law.
What shocked people were the penalties that Wisconsin imposed on those who broke the law. Violators will lose the right to vote in the election in which they bet.
Prediction market platform Kalsi blasted the law. “This is blatantly unconstitutional and illegal,” Benjamin Freeman, Karshi’s director of political growth, said in a post on X. Polymarket told the Milwaukee Journal Sentinel that it looks forward to addressing the allegations through the appropriate legal process.
It’s not just Wisconsin. According to the Pew Research Center, 23 states have laws banning betting on elections. New York also does not allow voters to vote in elections they have bet on, while in most other states, violators can face fines and jail time if they bet on elections.
But does the language of state law apply to transactions under event contracts? The answer varies by state, but many are unsure.
A fierce battle took place
In Colorado, betting on elections is a Class 2 misdemeanor punishable by up to 120 days in jail or a $750 fine. “Colorado law prohibits betting and gambling on elections, including prediction markets,” Lawrence Pacheco, a spokesman for Colorado’s attorney general, said in a statement.
But few states were as outspoken as Colorado. A spokesperson for the New York attorney general said the attorney general has not formally interpreted the election gambling law and whether it applies to prediction market trading.
The Arizona Attorney General’s Office declined to comment on whether Arizona law applies to election event contracts, citing active litigation with prediction market platforms. Phil Buehler, a spokesman for the Tennessee attorney general, said he could not comment on what is essentially a request for a legal opinion on a “hotly contested issue.”
In March, the Maryland State Board of Elections said in a memo to voters that users should be careful when considering trading elections on prediction market platforms, warning that they could violate state laws prohibiting betting on elections. And in July, state elections administrator Jared DeMarinis wrote a letter to the state attorney’s office asking them to investigate whether prediction market election offerings violated Maryland law.
“That’s why we issued the March letter early,” DeMarinis said in an interview. “This is still in its early stages…and we need to seek clarity.” He added that if current law is interpreted to not apply to prediction market trading, he is interested in seeking action from the state Legislature to provide that clarity.
Nevada, on the other hand, bans election gambling, but a court ruling has forced Polymarket and Calci to cease operations in the state. Due to a Michigan court order that also prohibits election betting, Calci is currently under full operational suspension in the state, with Polymarket only blocking residents’ access to sports-related event contracts.
Commodity Futures Trading Commission headquarters in Washington, DC
Ting Sheng | Bloomberg | Getty Images
new front
States are already battling the federal government over regulation of prediction markets. Because the Commodity Futures Trading Commission considers all event contracts to be swaps, which are derivatives that the commission regulates, companies believe they fall under the commission’s jurisdiction, preempting state law. Each state considers the provision of sporting event contracts by platforms to be gambling and is subject to regulation.
But legal experts say the election could introduce a new line of defense for states. Because the U.S. Constitution explicitly gives states the power to administer elections, states could argue in court that that power extends to regulating all forms of election financing.
“From a preemption perspective, I think the argument is probably stronger that states have some role in the regulatory arena when it comes to elections,” said David Oriwenstein, a partner at Pillsbury and head of the firm’s securities enforcement practice. “I think the fact that the state’s role is clearly defined makes the argument that the state retains jurisdiction a little bit easier.”
In 2024, a federal appeals court ruled that event contracting platforms could list election-related products. However, the decision reversed an intervention by the CFTC to reject the list of these contracts rather than provide a legal opinion on state laws regarding election gambling, which the commission at the time had used as part of its rejection reasons.
In this photo illustration, an online prediction market site’s app is displayed on an electronic device on February 25, 2026 in Chicago, Illinois.
Scott Olson | Getty Images
“States will argue that not only local elections but national elections have district-level and state-level outcomes, and when there are close elections, there are various collateral consequences for individuals to bet on the outcome of those elections,” said Joshua Mitts, a professor at Columbia Law School.
New York state’s lawsuit against Carsi not only alleges that the platform’s sports contracts violate state gaming law, but also points out the company’s culture and election event contracts. A spokesperson for the New York State Attorney General added that the office does not have a particular view on jurisdiction over election contracts specifically, but rather believes it has the authority to regulate all forms of gambling.
Even if states introduced this new argument in their battles with the federal government in court, the CFTC’s argument would likely remain the same. That’s because no matter what the topic of a prediction market is, the underlying product, the swap, remains the same.
Kalsi made that point in a statement to CNBC. “The law is clear: regulated prediction markets are subject to exclusive federal jurisdiction,” spokeswoman Elizabeth Diana said.
A spokesperson for Polymarket expressed a similar opinion. “As the court has recognized, the prediction markets of CFTC-registered exchanges are governed by federal law, not a collection of state laws.”
The CFTC did not respond to requests for comment.
Ian Thomas, a principal attorney in Offit Kullman’s commercial litigation practice group, agreed with other legal experts that states could take a position in court that their constitutional right to administer elections gives them authority over prediction market related event contracts.
But with sports making up the majority of the volume on prediction market platforms, these deals are unlikely to disappear from the central discussion, he said.
“Sports is really where everyone’s main focus is because it’s such an important aspect of these platforms. And I think that once the sports issue is resolved, it could lead to easier resolutions as to where the boundaries are for these platforms with respect to other topics,” Thomas said.
Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.
