Election Betting Sweeps Nation, Drawing War of Words and Clash of Laws

14 October 2026

The turf war between federal financial regulators and states over election prediction markets is squarely in the public spotlight ahead of the midterm vote, as the federal Commodity Futures Trading Commission (CFTC) seeks to preserve its oversight while state laws seek to shut down platforms betting on political outcomes.

The CFTC, which views the financial contracts predicting election outcomes as swaps under its jurisdiction, sees its authority as threatened by state regulators who view these contracts as illegal election gambling. Ahead of November elections, the push and pull from both sides is intensifying as the legal battles play out in the courts and Congress weighs in on the industry's future.

"This is a really difficult issue," said Chris Kalabokis, a lawyer and expert in the Securities Industry and Financial Markets Association. "At the end of the day, this ultimately gives a lot of power to the federal government to permit things like this."

The pushback from the states has been swift. A 44-state coalition of attorneys general last month wrote to the CFTC in opposition to its newest proposed rules, calling them a "new type of casino" while cautioning that letting them proliferate could pose a threat to the democratic process.

Beyond banning election wagering outright, they also threatened the political process and the validity of elections, according to the letter.

More recently, the CFTC unveiled a rule in October that would recommend trading on election outcomes as long as the contracts meet its regulatory standards. At the same time, foundations that promote good governance have also sounded an alarm.

"The continued popularity of prediction markets is increasingly capturing legal and public attention from a wide range of courts, legislatures, and government officials," David Donnelly, president of the watchdog group Every Voice, told reporters. "But the unsettled legal questions and the industry's fervent lobbying campaign have left in place no clear regulation or restriction."

Midterm-year pressure

The disagreement has reached a flashpoint as more and more Americans are using trading platforms like Kalshi and Polymarket to bet on election outcomes, prompting states to restrict the practice.

A recent campaign financial and lobbying report detailed that Kalshi, Polymarket, and the Coalition for Prediction Markets had already dropped at least $3 million on state and federal campaign contributions alongside their lobbying efforts, fighting to restrict the states' ability to shutter the wagering.

Kalshi alone had a registered lobbyist in 41 states by September, spending hundreds of thousands more on state politicians than federal ones.

Under the spotlight

"Prediction markets are deeply concerning when associated with elections," said Kalabokis, the lawyer. "Their impact is potentially profound, and there needs to be some supervisor to make sure it's not corrupting the process."

More on this is available via Live Casino IE.

The political maneuvering hasn't gone unnoticed by voters. A recent Reuters/Ipsos poll found that 60% of U.S. adults oppose betting on election results, with 69% of Democrats and 61% of Republicans on board.

But the battle over their existence hinges on whether prediction markets are gambling operations - and therefore the purview of the states - or federally regulated financial products that are swaps.

Scholars and critics worry that betting on elections could warp the democratic process and raise questions about how Americans engage in democracy. "It's a serious and potentially very profound situation where we're talking about financial incentives being co-mingled with the blockbuster of American politics," said Joe Shahid, senior research fellow at the Stanford Cyber Policy Center.

In May, the U.S. District Court for the Southern District of New York sided with Kalshi, saying in part that state laws are "expressly preempted" by the Federal Swaps Act. More recently, U.S. District Court Judge Michael T. Liburdi ruled that Arizona's powers to prosecute Kalshi over alleged illegal sports and election wagers were preempted.

The fight could end up with the Supreme Court. The federal circuit courts are split, with the 9th siding with states in its ruling, while the 3rd upheld the CFTC's powers in prediction markets.

Some lawmakers have begun to take notice, and are looking into the roles of both the states and federal regulators alike in prediction markets. For example, Rep. John Moolenaar, R-Mich. recently introduced legislation that would require the CFTC to provide a report of its authority over the markets, and track the scope, structure, and regulatory implications of prediction markets on American democracy.

Kalabokis said that, broadly speaking, the realm of prediction markets remains an open and unsettled topic of regulation, rather than any one political platform or set of actors.

How the courts decide the CFTC's mandate, as well as the extent of state laws, could have long-term pressure on how both levels of government view and regulate a new generation of financial instruments in America.

"The prediction markets present a unique regulatory challenge," said Kalabokis. "I think it's probable that we will continue to see some back and forth between the states and feds before the space settles."

Supplied article: this text and the links in it were placed by a third party. It is published as it came, and it is not an editorial recommendation.