The prediction market wars are far from over. In fact, they're just getting started.

After a year of explosive growth, regulatory battles, and corporate maneuvering, the fight over whether sports event contracts constitute gambling is likely headed to the U.S. Supreme Court. And depending on how that case lands, the entire sports betting industry could look very different by the end of 2026.

The Quick Hit

• Pending lawsuits: 20+ against Kalshi, Robinhood, and Crypto.com
• Key issue: Are sports event contracts federally regulated derivatives or unlicensed gambling?
• Most likely outcome: Supreme Court decides in 2026 or early 2027
• Stakes: The future of legal sports betting in America

What Happened in 2025

Prediction markets went nuclear. What started as a niche space exploded into a multi-billion dollar industry after the 2024 election cycle proved people wanted to bet on more than just sports.

Kalshi led the charge. Their monthly trading volume jumped from under $100 million in 2024 to over $13 billion by late 2025. They raised $1 billion at an $11 billion valuation in December. The company transformed from startup to genuine threat to traditional sportsbooks in less than 18 months.

DraftKings and FanDuel saw the wave coming and launched their own prediction market products. DraftKings Predictions went live in 38 states in December. FanDuel Predicts launched in five states days later.

And then the lawsuits started piling up.

The Legal Battle

State gaming regulators aren't happy. Nevada's Gaming Control Board sent cease-and-desist letters to Kalshi. New Jersey and Maryland followed. Tribal gaming interests filed lawsuits. The American Gaming Association lost two of its biggest members — DraftKings and FanDuel — over the dispute.

The core question: Are sports event contracts (betting on whether a team wins) regulated derivatives that fall under federal CFTC oversight, or are they gambling that states have the right to regulate?

Kalshi argues they're derivatives. State regulators say they're gambling by another name. And with 20+ lawsuits pending, this fight isn't getting resolved in settlement negotiations.

A Truist Securities analyst said the matter is "likely headed to the US Supreme Court." Given the money involved and the conflicting interpretations of federal law, that assessment seems accurate.

Why This Matters

If the Supreme Court rules that sports event contracts are federally regulated derivatives, state gaming commissions could lose significant authority over sports betting. Kalshi and similar platforms could operate nationwide without state-by-state licensing.

If the Court rules the other way, prediction market companies could be forced to shut down or dramatically restructure. DraftKings and FanDuel's new prediction market products would also be affected.

Either way, the decision will reshape the industry.

The Current State of Play

For now, both sides are operating in legal limbo. Kalshi continues accepting bets while fighting lawsuits. DraftKings and FanDuel launched prediction apps without waiting for regulatory clarity. Everyone is betting (pun intended) that they'll win eventually.

Analysts say neither DraftKings nor FanDuel appears worried about losing their state gaming licenses over this. Their legal teams clearly believe they're on solid ground.

The Bottom Line

2025 was the year prediction markets exploded. 2026 will be the year courts decide what that means.

The Supreme Court battle will determine whether sports betting remains primarily a state-regulated industry or becomes something more federally controlled. That's a massive shift with implications for everyone — operators, regulators, and degenerates alike.

Buckle up. This is going to be a wild ride.