Prediction Markets Weekly Roundup: Appeals Build as CFTC Debates Market Oversight
Federal appeals are taking on a larger role in the prediction market fight, while the CFTC is moving toward new rules for the sector.
Prediction market disputes continued to shift toward federal appeals courts this week, as Kalshi sought relief from state enforcement and Crypto.com agreed to await a Ninth Circuit ruling that could shape the broader preemption fight.
At the same time, U.S. Commodity Futures Trading Commission Chairman Michael Selig used the agency’s Innovation Advisory Committee meeting to outline a new regulatory roadmap for prediction markets, including planned rules covering consumer protection, product governance and market design.
Here are the biggest prediction market developments from the past week.
Prediction Market Legal Battles Continue
Second Circuit Denies Kalshi Immediate Relief
Kalshi suffered another setback in its case against Connecticut. U.S. Circuit Judge Sarah A. L. Merriam, with the Second Circuit Court of Appeals, denied Kalshi’s request for a temporary injunction while a three-judge panel from the circuit could review the motion. Connecticut regulators have until this Monday to submit a full opposition.
The development follows U.S. District Judge Vernon D. Oliver’s denial of both Kalshi’s preliminary injunction request and a subsequent injunction pending appeal in Connecticut.
Kalshi Restricts Markets in Washington State, Seeks Reconsideration
Kalshi has restricted access to several categories of event contracts in Washington state after a state court injunction took effect.
The exchange notified users that, as of Thursday, they could no longer open positions in sports, elections and politics, culture, technology and science, and mentions markets.
The restrictions follow a preliminary injunction requiring Kalshi to stop offering numerous event contracts in the Pacific Northwest state. Kalshi has now filed a motion asking the judge to reconsider the amended preliminary injunction or, alternatively, reconsider his refusal to stay the order.
Crypto.com, Washington Agree to Await Ninth Circuit
Also in Washington, Crypto.com and state officials moved to pause their federal legal battle while related Ninth Circuit appeals remain pending. The parties pointed to pending Ninth Circuit appeals involving Crypto.com, Kalshi and Robinhood in Nevada, which they said raise the same federal preemption issues.
Washington would refrain from certain enforcement until after the Ninth Circuit resolves at least one of those appeals, while the lawsuit would be administratively stayed.
New York, CFTC Clash Over Emergency Order
The confrontation between New York and the CFTC continued this week over the regulator’s emergency order for Kalshi to continue operating even if a court orders it to stop. New York asked to file a response to the CFTC order, which the agency opposed. It argued that the federal district court is not the proper venue for New York to challenge the validity of an agency order.
U.S. District Judge Lorna G. Schofield granted New York permission to respond, setting an Aug. 31 deadline and allowing the CFTC to reply by Sept. 7.
DOJ Defends Prediction Market Contracts as Swaps in US Soldier Case
Federal prosecutors are opposing an attempt by the U.S. soldier accused of using confidential information to profit on Polymarket to dismiss the case.
Prosecutors say Gannon Ken Van Dyke used classified military information to make more than $400,000 trading Venezuela-related event contracts. The case received national attention for insider trading on prediction markets.
Van Dyke argues the contracts were not swaps covered by the Commodity Exchange Act. The DOJ disagrees, arguing Congress broadly defined swaps to include contracts dependent on events associated with potential financial, economic, or commercial consequences.
Prediction Market Industry Updates: Meetings, New Products and Exchanges
CFTC Prediction Market Meeting Focuses on Manipulation
On Thursday, at the CFTC’s first Innovation Advisory Committee meeting, Selig promised new “rules of the road” for prediction markets. He outlined a regulatory roadmap covering consumer protection, product governance, and market design, while reiterating the agency’s authority over federally regulated event contracts.
While several executives backed a federal regulatory framework, the discussion also exposed disagreements.
CME Group Chairman and CEO Terry Duffy challenged the CFTC’s approach to self-certified contracts and clashed with Selig and Kalshi co-founder Luana Lopes Lara over what types of event contracts exchanges should be permitted to list.
Novig Reports $125M Opening Week
Novig reported more than $125 million in notional trading volume during the first week following its nationwide prediction market launch. According to the company, its first-week sports volume surpassed the opening-week sports totals of Kalshi, Polymarket US, Underdog and DraftKings’ DKeX.
Novig’s highest-volume day generated $26.3 million, while parlays, or combos, accounted for approximately one-third of activity. Baseball was the most heavily traded sport.
The launch came less than two months after Novig received CFTC approval to operate a designated contract market.
Polymarket US Tests Parlays
Polymarket US has begun testing sports combos after previously self-certifying rules for the product in May.
The move follows similar expansions by other prediction market exchanges such as Kalshi and Crypto.com. Combos make up a significant share of sports event trading volume, as evidenced by Novig’s launch figures. According to Ticker Tacker, parlays accounted for almost 40% of Kalshi’s recent volume.
New Federal Bill Targets Wildfire Contracts
U.S. Rep. Michael Baumgartner, R-Wash., introduced H.R. 10109 on Monday, proposing restrictions on certain prediction market contracts involving wildfires.
It joins a growing list of federal bills targeting prediction markets. The proposals range from bans on certain market categories to restrictions on trading by government officials and broader consumer protection measures.
Alpaca Registers as FCM
Brokerage infrastructure company Alpaca has registered as a futures commission merchant with the CFTC and joined the National Futures Association ahead of a planned prediction market launch.
The registration makes Alpaca the latest company to move toward prediction markets. Unlike social sportsbooks Fliff and Onyx, which applied last week for FCM and NFA status, Alpaca has already secured its registration.
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