Prediction Markets Weekly Roundup: Court Battles, CFTC Action and Kalshi’s New Products

Courts in New York, Michigan, and Washington saw new developments involving Kalshi this week, while the CFTC exercised emergency powers for the first time in the Michigan dispute and lawmakers continued to scrutinize the rapidly growing prediction market sector. Companies also expanded into new products and distribution channels, underscoring the industry’s continued momentum despite mounting legal and regulatory challenges.

Prediction Market Litigation Continues Across Multiple States

Michigan Extends Kalshi Sports Contract Ban

Judge Rosemarie Aquilina extended Kalshi’s Michigan temporary restraining order. The judge rejected Kalshi’s preemption arguments, stating that the company was not dealing in commodities but in “gambling, which has traditionally been denied by the states.”

The court also imposed an Aug. 12 deadline for Kalshi to geofence the state or face fines of $500,000 per day.

Kalshi Asks For An Injunction Pending Appeal in New York

Kalshi asked Judge Analisa Torres for an injunction pending appeal after she denied its request for a preliminary injunction earlier this month. The company argues that the decision threatens its business and conflicts with other courts that have found the Commodity Exchange Act preempts state gambling laws.

New York has agreed not to bring an enforcement action against Kalshi through July 30, pending consideration of the request.

The following day, Judge Torres ordered state officials to file an opposition letter by July 22, with a decision on the emergency request expected shortly afterward.

Kalshi’s Washington Appeal Put on Hold Pending Ninth Circuit Decision

Kalshi and Washington state jointly asked the Ninth Circuit to pause briefing in the company’s appeal over Washington’s gambling enforcement action until the Ninth Circuit issues decisions in the consolidated Nevada appeals.

Those cases are expected to address the core question underlying nearly every prediction market lawsuit: whether federal commodities law preempts state gambling laws when applied to CFTC-regulated event contracts.

Washington follows Arizona, which previously also filed a pause request pending the Nevada outcome.

American Gaming Association Seeks to Join Wisconsin Litigation

The American Gaming Association (AGA) moved to intervene in the federal lawsuit brought by the CFTC against Wisconsin officials.

The trade association argues that the case could significantly affect state gaming regulation and the authority of licensed sportsbooks. According to the filing, Wisconsin does not oppose the intervention, but federal regulators do.

CFTC Filings and Industry Developments

CFTC Orders Kalshi to Honor Michigan Trades

The CFTC used its emergency authority to block Kalshi’s proposal to unwind certain Michigan trades after the court order. The regulator instead ordered the exchange to honor those positions.

The CFTC said allowing exchanges to cancel trades based on a customer’s location could undermine market integrity and create uncertainty for market participants.

The Michigan order marks the first time a state court has sought to unwind already executed prediction market trades.

Water Street Labs Becomes the Newest DCM, ICE Expands Into Event-Driven Futures

The CFTC approved Water Street Labs’ application to become a designated contract market (DCM). The approval marks the latest federally regulated exchange capable of listing futures and swaps products.

According to the designation order, the exchange plans to offer fully collateralized products through both a central limit order book and a parimutuel auction model, potentially adding another competitor to the growing event contracts market.

Meanwhile, Intercontinental Exchange (ICE) certified a new suite of economic indicator futures contracts tied to major macroeconomic data releases.

Kalshi Launches Pro Platform and Expands Into New Markets

Kalshi introduced Kalshi Pro, a new interface designed for active traders and more sophisticated users.

The exchange also launched contracts tied to minor league baseball and drug trial results, further diversifying its offerings beyond politics and major sports. However, Kalshi appears to have shelved plans to launch markets on flight cancellations after previously signaling interest in the product.

Meanwhile, OpenAI began displaying Kalshi’s World Cup odds directly in ChatGPT responses this week. The development gives the prediction market operator access to a significantly larger audience.

Congress Continues to Probe Prediction Markets

Prediction markets also remained in lawmakers’ sights this week.

A bipartisan bill backed by Kalshi would require online sportsbooks and prediction markets to use facial recognition technology to estimate users’ ages before allowing them to place bets or trades.

Separately, Rep. Raja Krishnamoorthi sent a letter to Polymarket’s CEO. He is seeking answers over allegations that paid influencers promoted election misinformation while advertising prediction markets.

Geographic Restrictions Expand in North America

Polymarket blocked access in several Canadian provinces this week, including Alberta, which launched its iGaming market on Monday.

Meanwhile, Google expanded its ban on prediction market advertising to Michigan and New York. The move means operators can no longer advertise prediction market contracts in those states, which now join Nevada and Ohio on Google’s restricted list.