In early March, Donald Trump Jr. addressed a gathering of Republican state attorneys general at a retreat in New Orleans, entering a contentious debate over the regulation of prediction markets, a growing sector in which the Trump family holds financial interests. Trump Jr. argued that state efforts to regulate these platforms were influenced by gambling firms seeking to maintain monopolies, asserting that prediction markets already operate under robust federal oversight through the Commodity Futures Trading Commission (C.F.T.C.).

Prediction markets, exemplified by companies such as Kalshi and Polymarket, allow users to place bets on a wide range of events, including sports outcomes, political elections, and other real-world scenarios. The companies classify these wagers as “event contracts,” financial instruments regulated at the federal level, a position supported by the Trump administration. This has sparked a legal conflict with states seeking to impose their own regulations, with 20 states currently engaged in litigation over the question of whether these markets fall under state laws governing gambling and sports betting.

State officials, including both Republicans and Democrats, contend that prediction markets resemble traditional gambling operations and accuse them of evading state regulations and taxes, which some estimates peg at $2 billion annually in lost revenue. In July, 44 states signed a letter denouncing these platforms as “new forms of casinos” that target younger demographics, noting that unlike sports betting—which generally restricts participation to those 21 and older—prediction market apps can be accessed by users as young as 18.

Kalshi, the largest U.S.-based prediction market, has been the primary target of legal action, while Polymarket’s U.S. presence remains smaller with most of its activity occurring internationally. Kalshi maintains that it offers consumer safeguards and operates under a national regulatory framework, likening its model to financial exchanges like the New York Stock Exchange or Nasdaq. The company asserts that it is improperly subject to state laws designed for traditional gambling, which they say do not apply to their federally regulated financial contracts.

The controversy has drawn in major gambling industry players, including casino groups and daily fantasy sports companies, who view prediction markets as competitive threats. The American Gaming Association, which represents casinos and gambling firms, has led a push for state enforcement against these markets, with some efforts involving coordinated actions by state attorneys general. Former New Jersey Governor Chris Christie has publicly criticized prediction markets as undermining state gambling regulations.

The C.F.T.C., under the leadership of Michael S. Selig—appointed by President Trump in late 2025—has actively intervened in the dispute by filing lawsuits against nine states, all governed by Democrats, that have taken legal action against prediction markets. The commission has also used emergency powers on multiple occasions to instruct companies like Kalshi to disregard state or federal court rulings that seek to halt operations, a move described by some observers as unprecedented in the agency’s history.

This federal-state conflict has generated mixed judicial outcomes. Some states, such as Washington and Nevada, have secured rulings ordering Kalshi to cease operations, while a federal appeals court recently sided with Kalshi in a New Jersey case. Conversely, another appeals court ruled against the company in a Nevada-related case, suggesting the dispute may ultimately be resolved by the U.S. Supreme Court.

While federal officials maintain that their legal efforts reflect the most aggressive state regulatory responses rather than political bias, critics point out the alignment between the Trump administration’s support for prediction markets and the Trump family’s financial involvement in the industry. Kalshi hired Donald Trump Jr. as an adviser in early 2024, granting him shares that have since increased in value; he also advises Polymarket through his investment firm.

As the litigation continues, the outcome will have significant implications for the future of prediction markets, their regulatory oversight, and the balance of authority between federal agencies and state governments.