States’ Uprising Against Prediction Markets

States and the federal government are locked in a legal battle, fighting in courts across the country to determine which of them gets to regulate prediction markets. The controversy represents yet another federal challenge to state authority during President Donald Trump’s second term — and a backlash from governors and state attorneys general determined to preserve what they believe are fundamental state regulatory powers.
A federal agency has sued at least nine states over their attempts to bar or regulate prediction markets. State leaders, meanwhile, have doubled down on their arguments that prediction markets are a form of gambling, which states have the authority to govern. Some state officials fear damaging consequences if they are not allowed to place limits on these markets, which have exploded in popularity.

“Gambling is the addiction with the highest suicidal ideation,” says Minnesota Rep. Emma Greenman. “It's the addiction with the highest amount of bankruptcies. And what the research is now showing is, as these markets have basically created an unregulated gambling platform across the country it is impacting particularly young people, young men, in really negative ways.”

Financial Derivatives or Gambling?

At the core of the debate is the question of whether prediction markets are a form of gambling. These platforms — the most well-known of which include Kalshi and Polymarket — allow for users to purchase “event contracts” which predict that a particular event will take place (or not take place). If the user’s contract is correct, the contract pays out. Users can purchase event contracts for everything from the outcome of a baseball game to the beginning of a war.

Many state legislators and attorneys general see this as straightforward gambling.

https://www.governing.com/policy/states-uprising-against-prediction-markets