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Prediction markets hit a federal snag

Jul 9, 2026, 1:24pm EDT

An SDNY judge dealt a blow to Kalshi and Polymarket this week, ruling that New York’s gambling regulations do apply to Kalshi’s sports-event contracts, and making it all but inevitable that the states will be squaring off against prediction markets operators at the Supreme Court in the future.

The decision contradicts another, earlier, appellate ruling that New Jersey’s gambling laws don’t trump the authority of the Commodity Futures Trading Commission.

Tuesday’s ruling gives powerful ammunition to the 16 other states that have filed similar claims against the prediction markets, arguing that Kalshi and Polymarket deprive them of revenue from their casinos and gaming operations.

Kalshi, Polymarket, and CFTC chair Michael Selig have countered that these markets are not gambling, but are futures contracts — a distinction that critics say is moot. They also say corporations can use their platforms to hedge their business risk more precisely than conventional financial instruments. “We are seeing a ton of institutional interest,” Selig told Semafor last month.