Unsettled Billions: A Year of Prediction Markets, Sports Event Contracts, and Litigation
President Donald Trump’s inauguration set the tone for prediction markets in 2025. The Commodity Futures Trading Commission (CFTC) allowed sports event contracts to go live on CFTC-regulated platforms, Polymarket launched a legal U.S. product, and even DraftKings and FanDuel have been able to launch their own CFTC-regulated exchanges
Under Caroline Pham’s leadership, the CFTC asked for additional documentation showing that sports contracts complied with existing regulations. That request briefly paused trading on many Super Bowl contracts, but since then, sports contracts have expanded to include individual game victories, point spreads, and parlays.
Prediction News Update also covered the unique role the Trump family’s business ties have likely played in event contracts’ expansion. Crypto.com secured a partnership with Truth Social in October. Donald Trump Jr. is also an advisor for Kalshi and Polymarket. Meanwhile, Trump Jr’s investment firm has also invested in Polymarket.
Republicans in other administrations have supported sports contracts. Kalshi board member, Brian Quintenz, wrote a dissenting statement supporting ErisX’s sports contracts in 2021. While other presidents may have let sports contracts slide, no other president would be privately invested in the success or failure of the industry like Trump.
Kalshi’s early win, states fight back
Kalshi went from early victories in Nevada and New Jersey to having its first preliminary injunction overturned at the end of the year.
The legal tide began to turn in favor of states that filed cease-and-desist letters after Maryland Judge Abelson reasoned that Congress was unlikely to intend “to displace all state laws that would otherwise apply to transactions that fall within the scope of the CEA.” Focus on federal preemption and the definition of swaps tends to favor Kalshi, while Maryland found success in arguments revolving around congressional intent.
Influential gaming tribes have also made their mark through amici briefs. However, a group of California tribes lost its preliminary injunction motion in San Francisco federal court. Its appeal in the Ninth Circuit will be a crucial juncture that will decide whether the tribes will be competitive in court or whether their main contributions will be amici briefs.
Crossroads for growth and legality
So far, 10 states are engaged in litigation with Kalshi and other prediction market platforms. Sports contracts may be the same (except for pricing mechanisms) as what state-regulated sportsbooks offer. However, the battle between congressional intent and federal preemption will continue to play out.
The clearest indicator of how this legal saga could play out will be the Third Circuit’s written opinion. A victory for Kalshi in the Third Circuit increases the odds of a circuit split, which would increase the odds of a Supreme Court hearing. That opinion is expected any day.
Even as these cases play out, prediction markets are on track for hundreds of billions in trade volume, with sports projected to be the single largest category, and the midterms awaiting political traders in November.
The long-term size of the industry remains to be seen, but its immediate future remains bright.