Prediction Markets Weekly Roundup: Courts Split, New York Sues Kalshi, IG Buys Underdog

Prediction markets saw another eventful week as courts issued conflicting rulings on federal preemption, New York launched a lawsuit against Kalshi, and IG Group agreed to acquire Underdog. Additionally, Robinhood and Coinbase reported continued growth in prediction markets, while the Commodity Futures Trading Commission (CFTC) closed the public comment period on its proposed event contract rule.

Here’s what happened this week.

Litigation Dominates Another Busy Week

Split Federal Court Decisions for CFTC

The CFTC recorded both a major courtroom victory and a significant defeat.

In Minnesota, U.S. District Judge Katherine Menendez granted the CFTC’s request for a preliminary injunction. The order prevents the state from enforcing its prediction market ban, which is set to take effect on Aug. 1.

The court concluded that some event contracts likely qualify as “swaps” under the Commodity Exchange Act (CEA) and therefore fall within the CFTC’s “exclusive jurisdiction.”

Just one day later, however, U.S. District Judge William Griesbach denied the CFTC’s request for similar relief in Wisconsin. The court questioned whether sports-event contracts qualify as swaps under federal law and rejected the regulator’s argument that the CEA likely preempts Wisconsin’s gambling laws.

New York Rulings Open Door to State Lawsuit

Kalshi suffered a difficult week in its dispute with New York.

U.S. District Judge Analisa Torres denied the exchange’s second request for emergency relief, and a Second Circuit judge later rejected Kalshi’s bid for an injunction pending appeal.

Those decisions cleared the way for New York Attorney General Letitia James to file a lawsuit accusing Kalshi of operating an illegal gambling business in the state. The lawsuit seeks to permanently shut down Kalshi’s operations in the state, recover allegedly unlawful proceeds and impose civil penalties.

Hours after the filling, Kalshi removed the lawsuit to federal court, arguing it raises federal questions under the CEA. Meanwhile, the day before New York’s complaint, the CFTC submitted its own emergency request for a temporary restraining order against New York’s enforcement efforts in its case against the state.

Sixth Circuit Signals Skepticism Toward Kalshi’s Preemption Arguments

The U.S. Court of Appeals for the Sixth Circuit also heard oral arguments in the consolidated cases involving Kalshi, Ohio and Tennessee.

The panel appeared skeptical of Kalshi’s broader preemption arguments, questioning whether Congress intended for federal law to preempt products such as Kalshi’s sports-event contracts. The judges noted that there has not been a clear interpretation of the law.

The court also pushed back against Kalshi’s broader claims against state oversight. Judge Eric L. Clay said he’s not so sure that “all things are better if they come from the federal government.”

A ruling (likely months away) against Kalshi would directly conflict with the Third Circuit’s earlier decision in New Jersey in favor of the operator. A split increases the likelihood that the U.S. Supreme Court will eventually have to resolve the issue.

Meanwhile, the Supreme Court granted New Jersey another extension, giving the state until Sept. 3 to file its petition seeking review of the Third Circuit’s ruling.

Industry Developments: Acquisitions, Earnings

IG Group Agrees to Buy Underdog

Outside the courtroom, IG Group, a global fintech company, announced one of the biggest deals yet in the prediction market industry, agreeing to acquire Underdog for $1.3 billion.

IG said the acquisition will establish it as a leader in the U.S. prediction markets by combining Underdog’s sports-focused platform with its own trading infrastructure. The company said the deal will significantly expand its U.S. presence, add nearly one million monthly active users, and broaden its customer base with a younger, mobile-first demographic.

Underdog entered prediction markets less than a year ago and has quickly become one of the largest operators in the space. IG said the company generated $466 million in net revenue over the last 12 months through June 2026. According to an investor presentation, Underdog ranks third in U.S. prediction markets by volume.

IG said it ultimately plans to expand Underdog beyond sports into financial markets, crypto, politics and culture.

Robinhood, Coinbase Post Strong Quarterly Gains

Robinhood and Coinbase released their second-quarter earnings. Both companies reported strong results in the prediction-market segments of their businesses.

Robinhood reported nearly two million customers traded prediction markets during the second quarter. Meanwhile, executives said Rothera has already become a top-three prediction market in the U.S., a claim the newly combined IG Group and Underdog would likely contest.

Event contract revenue and trading volume increased by roughly 50% from the previous quarter as Robinhood continues to shift activity onto its own exchange.

Coinbase also highlighted continued momentum in prediction markets. CEO Brian Armstrong said prediction market contracts and revenue doubled quarter over quarter. The company confirmed it plans to introduce “combos,” allowing customers to combine multiple predictions into a single trade.

CFTC Public Comments, White House Teleprompter and CME Group

The CFTC’s public comment period on its proposed prediction market rules officially closed this week after attracting 1,443 submissions. Notable responses came from 44 state attorneys general, major sports leagues, tribal gaming organizations, prediction market operators and former Sen. Christopher Dodd, one of the architects of the Dodd-Frank Act.

Elsewhere, White House teleprompter operator Gabriel Perez has left the federal government. Earlier this month, reports alleged he used advance knowledge of President Donald Trump‘s speeches to trade on Kalshi and profit over $100,000. The case has drawn renewed attention to insider trading risks in prediction markets.

Meanwhile, CME Group announced plans to launch futures and options tied to sports performance indexes developed with FutureSports. The announcement came just days after CEO Terry Duffy said sportsbook-style prediction markets amount to gambling during the company’s second-quarter earnings call.