Prediction markets face state, federal, and city scrutiny

Prediction markets are under mounting legal and regulatory pressure across the U.S., with states, cities, and federal agencies clashing over who has authority. Baltimore filed lawsuits against Kalshi and Polymarket over alleged illegal sports betting, while the New York City Council launched a probe into marketing practices targeting young adults. Meanwhile, the CFTC ordered Kalshi to keep operating in New York despite a state lawsuit, and FlightAware dropped its suit against Kalshi after just one day.

Legal battles

Baltimore's complaint accuses Kalshi and Polymarket of running "illegal, unlicensed sports-betting platforms" and misleading users about their regulatory status. The city also named Robinhood, Webull, and Coinbase as partners in deceptive practices Source: Cointelegraph. In New York, Governor Hochul and AG James sued Kalshi, Coinbase, and Gemini for illegal gambling, but the CFTC used emergency authority to order Kalshi to continue operating, arguing states have "no business" regulating federally regulated markets Source: Gizmodo.

Marketing probe

The NYC Council sent letters to Kalshi, Polymarket, Coinbase, and Gemini Titan over "false, deceptive, unconscionable, and objectionable marketing practices," citing a Wall Street Journal investigation that found 70% of Polymarket influencer videos showed fake trades Source: CNBC, Gizmodo. Polymarket said it looks forward to engaging with the council Source: CNBC.

FlightAware suit

FlightAware sued Kalshi for using its flight data without authorization, but withdrew the case a day later. Kalshi changed its settlement source from FlightAware to "Primary Source Agency" and added a disclaimer Source: Engadget. Data shows the flight cancellation market had low liquidity, with only $1,842 in volume Source: CoinDesk.

What's next

Experts expect these disputes to escalate to the Supreme Court. The CFTC argues event contracts are "swaps" under its jurisdiction, while states claim they are gambling Source: Cointelegraph. New York's lawsuit seeks triple damages, and the council plans a hearing Source: Gizmodo, CNBC.