Legal counsel for prediction market platforms, operators, traders, and investors as they navigate CFTC oversight, state gambling enforcement actions, media and sports partnerships, and a rapidly shifting regulatory frontier.
Practice Areas — Gaming, Media & Technology Law
A New Frontier at the Intersection of Finance, Gaming, and Technology
Prediction markets—platforms that allow users to trade contracts whose value depends on the outcome of real-world events—have exploded onto the U.S. legal and financial landscape. Platforms like Kalshi, Polymarket, Robinhood, and Coinbase are attracting billions in investment and hundreds of millions of users, yet they exist at a contested crossroads: are they federally regulated commodity exchanges, or unlicensed gambling operations?
The answer—and your legal exposure—depends on who you are, where you operate, and what contracts you offer. Richt Law Firm represents clients across this ecosystem with a practice that spans privacy and data law, marketing and media law, online gaming and gambling law, and sweepstakes and social gaming law—all of which intersect in the prediction markets space.
Who We Can Assist
- Sports betting operators evaluating prediction market expansion
- Prediction market platform operators and startups
- Sports leagues and media companies entering partnership deals
- Crypto exchanges and blockchain protocols offering event contracts
- Institutional investors and VCs funding prediction market companies
- Operators facing cease-and-desist orders or state enforcement
- Technology providers building infrastructure for event contract platforms
BACKGROUND
What Are Prediction Markets?
At their core, prediction markets are exchanges where participants buy and sell contracts tied to the outcome of future events—elections, sports results, economic indicators, or even geopolitical developments. The price of a contract at any given moment reflects the crowd’s collective probability estimate for a given outcome. Proponents argue that this mechanism produces more accurate forecasts than traditional polls or expert opinion.
For a primer on how prediction markets work, the team at a16z Crypto has published an accessible overview: Prediction Markets Explained. From a legal standpoint, The Hitchhiker’s Guide to Prediction Markets provides useful background on the regulatory landscape.
The modern wave of prediction markets has been supercharged by two forces: the Trump administration’s friendly posture toward crypto and deregulation, and the post-2024 election vindication of platforms like Polymarket, which outperformed traditional polling in predicting election outcomes. As the New York Times explored in a detailed analysis, the distinction between prediction markets and sports betting, legally and practically, is far less clear than proponents claim.
Key Players
Kalshi is a CFTC-designated contract market (DCM) and the most legally prominent U.S.-based platform, having fought a multi-year battle to offer election and sports event contracts. Its valuation has reportedly doubled from $5 billion to $11 billion in a matter of months, reflecting massive investor confidence. It has forged a high-profile partnership with CNBC and reached deals with the NHL alongside Polymarket.
Polymarket operates primarily on blockchain infrastructure and became globally famous during the 2024 U.S. election cycle. It has since inked deals with the New York Rangers and the Wall Street Journal. A Wired profile detailed a trader revolt over a Zelensky-related contract, highlighting the governance and dispute-resolution challenges inherent in decentralized markets.
FanDuel, a dominant sports betting operator, announced plans to debut its own prediction market app to compete with Kalshi. Meanwhile, traditional finance is arriving: NYSE/ICE has made a strategic investment in Polymarket, and a new digital asset exchange received CFTC approval specifically for U.S. prediction markets. Robinhood has also entered the space, though it faces state-level pushback as discussed below.
For a broader picture of how media and sports organizations are partnering with prediction markets, see this Legal Sports Report piece on how prediction platforms are vying to compete with traditional sports betting.
"Prediction markets sit at a genuinely contested intersection of commodities law, gambling law, and financial regulation—and the law has not yet caught up with the technology."
LEGAL FRAMEWORK
The CFTC vs. States: A Jurisdictional Battle
The central legal question in the prediction markets industry is deceptively simple: Who regulates these platforms? Platforms like Kalshi argue that their contracts are “event contracts” regulated exclusively by the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA), and that federal law preempts state gambling regulations. States disagree, arguing that sports and entertainment event contracts are nothing more than sports betting under a different name—and that absent state licensure, operating these platforms is illegal gambling.
CFTC Oversight and the Path Forward
Kalshi’s platform operates as a CFTC-designated contract market (DCM), giving it a significant legal foothold. The CFTC has historically permitted event contracts on a range of outcomes, but sports events were long considered off-limits under an anti-manipulation and public interest standard. Kalshi successfully challenged that restriction in federal court in 2024. Following the 2025 change in administration, the regulatory climate has shifted meaningfully.
CFTC Acting Chairman Brian Quintenz and Chairman Brian Selig have both signaled support for a clear regulatory framework for prediction markets. Chairman Selig has published a formal statement and spoken publicly about “future-proofing” the CFTC’s approach to prediction markets—a framing echoed in this analysis: CFTC Chairman Wants to Future-Proof Prediction Markets. For a broader legal overview of where things stand, see this comprehensive roundup.
The a16z Crypto team has also weighed in on the infrastructure side, publishing a piece on how AI judges can scale prediction market resolution—a development with significant legal implications for dispute resolution and contract interpretation.
State Enforcement Actions
Despite the favorable federal posture, states have been aggressive. Multiple states have issued cease-and-desist letters or filed lawsuits, treating sports event contracts as illegal gambling under state law:
Massachusetts: AG filed lawsuit against Kalshi; federal court remanded case to state court. See also: ZwillGen analysis.
New York: Gaming commission issued cease-and-desist. Kalshi filed federal lawsuit against NY regulators.
New Jersey: Issued warnings; oral arguments held in Kalshi challenge.
Nevada: Fourth state to issue formal warning to prediction market operators.
Michigan: Regulator issued warning; Coinbase has sued Michigan in response.
Connecticut: Issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com for alleged unlicensed online gambling.
Illinois: Targeted by Coinbase federal lawsuit alongside Connecticut and Michigan to assert CFTC preemption.
Tennessee: Regulator issued directive to prediction market operators.
NCAA: Petitioned CFTC to prohibit contracts on college sports events.
Coinbase has taken an aggressive counter-stance, suing the gaming authorities of Connecticut, Michigan, and Illinois in federal court, arguing that prediction market contracts fall exclusively under CFTC jurisdiction and that state regulation is preempted by the CEA.
Court Decisions and SCOTUS Implications
Federal courts have reached divergent conclusions on the jurisdictional question, with a Cahill Gordon analysis documenting the deepening circuit split. The question of whether the CFTC’s authority preempts state gambling laws as applied to event contracts may ultimately require Supreme Court resolution—an issue analyzed in depth by InGame. For a comprehensive summary of all pending litigation and regulatory actions, see this legal status overview.
A fresh legal perspective from the Brogan Law blog notes that prediction markets represent a genuinely new legal category that doesn’t map cleanly onto existing regulatory frameworks. Attorney commentary from @WALLACHLEGAL has also tracked key developments in real time.
Critical Insight: Prediction market operators face a dual compliance challenge: maintaining their CFTC-regulated status while defending against state enforcement actions that may not be preempted. The legal strategy differs significantly depending on whether you are in federal court (where preemption arguments are stronger) or state court (where you may need to demonstrate compliance with state gambling laws on their own terms).
Kalshi’s decision to file its New York lawsuit in federal court—rather than defending in state court—reflects a deliberate strategy to keep the question framed as a federal preemption issue, rather than litigating whether its contracts are “legal” under New York gambling statutes.
KEY ISSUES
Critical Legal Issues for Prediction Market Participants
1. Event Contract Legality and CFTC Designation
Not all event contracts are created equal. The CFTC distinguishes between contracts on “excluded commodities” (economic events, like interest rates) and those on “exempt commodities” or politically sensitive events. Sports event contracts occupied a regulatory gray zone for years before Kalshi’s court victory in 2024. For platforms seeking to enter this space, obtaining a DCM designation or partnering with an existing DCM is the foundational legal question. Legal counsel for clients on CFTC registration, product design, and the ongoing contract review process is critical.
One early commentary examined the breadth of what Kalshi claimed users could legally do on its platform, a useful reference for understanding both the commercial ambitions and the regulatory risk exposure of broad event contract offerings.
2. Sports Partnership and Licensing Agreements
The prediction market industry’s explosive growth has triggered a wave of partnership deals with professional sports leagues and media companies. Kalshi and Polymarket both inked deals with the NHL; Polymarket partnered with the New York Rangers. These arrangements raise significant legal issues regarding data rights, integrity-monitoring obligations, compliance with state and federal gambling laws, intellectual property licensing, and revenue sharing. We help clients negotiate and structure sports data and media agreements on behalf of both sports organizations and technology platforms.
The Super Bowl has already emerged as a landmark event for prediction market trading volume, as explored in this a16z piece, underscoring the commercial stakes and the importance of well-drafted partnership agreements that can withstand regulatory scrutiny.
3. Media Partnerships and Content Agreements
Prediction markets are increasingly partnering with media outlets to embed market data into editorial content. Polymarket’s deal with the Wall Street Journal and Kalshi’s exclusive partnership with CNBC signal that traditional media sees these platforms as a new class of financial data provider. These agreements require careful structuring around editorial independence, data licensing, advertising law, and FTC disclosure requirements for sponsored financial content.
4. Insider Trading and Market Manipulation
The specter of insider trading looms large over prediction markets. If a trader has advance knowledge of a geopolitical event, through government access or other privileged information, and trades on that knowledge, it potentially implicates both CFTC anti-manipulation rules and broader fraud statutes. This is not hypothetical: two individuals were indicted for allegedly using classified information to trade on military operations. Separately, New Republic raised questions about suspicious trading patterns on Polymarket around geopolitical events. It is essential that platforms have legal counsel on market surveillance programs, AML/KYC obligations, and trader conduct policies.
5. Crypto and Blockchain Infrastructure Issues
Many prediction markets operate on blockchain infrastructure and may settle in stablecoins. This creates an additional layer of regulatory complexity: FinCEN money transmission requirements, SEC analysis of whether prediction contracts constitute securities, CFTC digital asset jurisdiction, and the treatment of stablecoin settlements. See also the CFTC approval of a digital asset exchange for U.S. prediction markets as a sign of regulatory direction. Polymarket’s resurgence post-2024 is examined in this Reason piece.
6. Privacy and Data Protection
Prediction market platforms collect substantial user data: trading history, financial information, identity documents for KYC, location data, and behavioral signals. These platforms must comply with privacy laws such as the GDPR, CCPA/CPRA, GLBA (to the extent they handle financial data), and other applicable privacy laws, a rapidly expanding set. Our privacy practice is equipped to handle the full range of compliance obligations facing prediction market operators, including data processing agreements with sports leagues and media partners, user consent frameworks, and data breach preparedness.
7. Terms of Service, Contract Design, and Dispute Resolution
Event contracts require unusually precise drafting: what exactly constitutes the “event,” how ties and ambiguous outcomes are resolved, what happens in the event of rule changes, and what dispute resolution mechanism applies. The Polymarket trader revolt documented by Wired illustrates what happens when contract terms are insufficiently precise. The emerging use of AI to adjudicate contract outcomes, explored in a16z’s piece on AI judges for prediction markets, adds new complexity to dispute resolution framework design. In addition to the event contracts, robust website and app terms and conditions are critical.
8. Critiques and Systemic Risk
Not all observers are enthusiastic. A rigorous critical perspective is presented in “Prediction Markets Are Not Good Markets”, which raises concerns about thin liquidity, susceptibility to manipulation, and whether market prices actually reflect true probabilities. These structural critiques have legal relevance: they bear on how platforms represent their products to users, what disclosures are adequate, and whether prediction market contracts should be treated as financial instruments subject to consumer protection regulation.
WHAT WE DO
Legal Services for the Prediction Markets Industry
We provide a full suite of legal services tailored to the unique needs of prediction market participants, from platform formation to regulatory defense.
Regulatory Compliance & CFTC Counsel
Advising on DCM designation, contract product approval, CFTC registration requirements, and ongoing regulatory obligations for prediction market operators.
State Enforcement Defense
Responding to cease-and-desist orders, defending against state gaming commission investigations, and litigating federal preemption arguments in court.
Sports & Media Partnership Agreements
Drafting and negotiating deals with sports leagues, media companies, and data providers, including data licensing, integrity provisions, and revenue-sharing structures.
Privacy & Data Compliance
CCPA/CPRA, GLBA, and state privacy law compliance, KYC/AML frameworks, data processing agreements, and user consent architecture for prediction market platforms.
Platform Terms of Service & Contract Design
Drafting precise event contract specifications, terms of service, dispute resolution mechanisms, and trader conduct policies designed to withstand legal challenge.
Blockchain & Crypto Integration
Legal analysis of blockchain-based prediction markets, stablecoin settlement structures, FinCEN/money transmission compliance, and SEC/CFTC digital asset analysis.
Venture Investment & M&A
Legal due diligence, regulatory risk analysis, and transaction counsel for investors and acquirers in the prediction market space.
Market Surveillance & Integrity
Designing and implementing market surveillance programs, insider trading policies, and anti-manipulation frameworks to satisfy CFTC core principles.
INTERSECTING PRACTICE AREAS
How Prediction Markets Relate to Our Broader Practice
Our prediction markets practice sits at the convergence of several established practice areas. Understanding this landscape is essential to navigating legal risk in the prediction markets space.
Online Gaming and Gambling Law
The central legal dispute in prediction markets, whether event contracts constitute gambling under state law, draws directly on gambling law analysis. Our online gaming and gambling practice encompasses state-by-state analysis of gambling statutes, the Wire Act, UIGEA, and the rapidly evolving case law on what constitutes a “game of chance” vs. a financial instrument. The same frameworks we use for online gaming clients inform our regulatory work on prediction markets.
Sweepstakes and Social Gaming
Sweepstakes casinos and prediction markets face a similar structural challenge: offering prize or payout structures without triggering state gambling prohibitions. Our sweepstakes and social gaming practice has deep experience in no-purchase-necessary mechanics, alternative consideration structures, and the limits of “skill vs. chance” analysis—all of which have direct analogs in prediction markets. As regulators look for new enforcement theories against prediction markets, it is likely that some of the same arguments deployed against sweepstakes casinos will be recycled.
Privacy and Cybersecurity
Prediction market platforms are financial services companies handling sensitive personal and financial data. Our privacy and cybersecurity practice covers laws such as the GDPR, CCPA/CPRA, GLBA, state data breach notification laws, and the CFTC’s own cybersecurity expectations for DCMs, among others. We help platforms build privacy programs that satisfy both financial regulators and consumer protection authorities.
Marketing, Media, and Advertising Law
As prediction markets pursue mainstream media partnerships and consumer-facing marketing, they become subject to FTC advertising rules, state consumer protection statutes, and platform-specific advertising policies that may restrict financial product promotion. Our marketing and media law practice ensures that prediction market operators can grow their user bases without inadvertently violating advertising law.
Speak With a Prediction Markets Lawyer
Whether you are launching a platform, responding to a state enforcement action, negotiating a sports or media partnership, or evaluating an investment, we can help you navigate the legal complexity of this emerging industry.