FTI Consulting warns federal-state regulatory clash threatens prediction markets
FTI Consulting published an analysis on October 22 flagging a mounting regulatory clash between federal and state authorities over prediction market platforms. The firm noted that event contracts now span topics from the Academy Awards to daily snowfall, with some platforms resembling financial instruments. Separately, New York state has contended that sports-based event contracts amount to unlicensed bets, even as federal regulators assert oversight of the same products as commodities.
The FTI warning puts a mainstream consultancy stamp on a legal fight that is already costing platforms real money. Kalshi has lost federal preemption in Ohio and Tennessee, and operators now face parallel suits in Utah and Missouri. The lack of a unified regulatory lane forces each platform to fund three legal fronts at once: federal rule comments, state court defense, and possible product redesign.
Trading firms face direct state liability too, as Utah's suit against Susquehanna demonstrated. Every state victory becomes template law the next attorney general copies, so the compliance cost rises faster for late responders. Platforms like Polymarket and Kalshi must choose between expensive geofences, product pullbacks, or fighting state by state without guaranteed federal backup.