The federal government has drawn a hard line to keep prediction markets running in the United States. On August 11 the Commodity Futures Trading Commission used its emergency authority to order Kalshi to keep operating nationwide, overriding a New York effort to shut the exchange down. The message was blunt: these are federally regulated markets, not something a single state may ban, and that same principle is the ground Polymarket's own return to the US now stands on.
The order followed a lawsuit New York Attorney General Letitia James filed against Kalshi on July 31, arguing the platform offers sports prediction markets without a licence from the state's Gaming Commission and seeking more than $36 billion in damages. Kalshi told the CFTC that the state's move had created a market emergency, and the regulator directed it to keep trading under the Commodity Exchange Act's core principles. "Congress did not intend for derivatives exchanges to be regulated under a patchwork of state gaming laws," CFTC Chair Michael Selig said.
New York is only one front. The CFTC has now sued nine states, Arizona, Connecticut, Illinois, Kentucky, Minnesota, New Mexico, New York, Rhode Island and Wisconsin, to stop them from treating these platforms as gambling and regulating them under state law. The courts have split: judges have shielded the exchange from one state's regulators while letting another state's case proceed, a contradiction that is almost certain to be settled higher up. The core question is simple and unresolved, whether a federal derivatives regulator or fifty separate state gaming authorities gets to say who may run an event contract.
Why this matters for Polymarket
Polymarket pulled back from US users after a 2022 settlement with the CFTC and returned to the American market in 2026 under that same regulator's oversight, a posture it has publicly supported. The legal theories being tested against Kalshi apply with equal force to any platform that offers event contracts to Americans, Polymarket included. If the CFTC's view that federal law controls holds up in court, Polymarket has a clear path to operate onshore in the US; if the states prevail, its US access stays fragile and its offshore structure could harden into a permanent arrangement.
For an ordinary reader, the practical takeaway is about certainty, not odds. A prediction market is only as useful as its right to be here legally tomorrow, so it is worth judging a platform on the things that survive a courtroom, its regulated status, its transparent fees and its published resolution rules, rather than on the noise of a federal-versus-state turf war. The fight over who regulates these markets is far from over, and its result will shape which platforms US readers can reach at all.
