The biggest fight in American gambling right now isn't happening in a casino or a sportsbook. It's happening in courtrooms across the country, where prediction market operators are battling more than 20 lawsuits and cease-and-desist orders from state regulators who say what they're doing is illegal gambling.

The outcome will reshape sports betting as we know it.

The Quick Hit

• What happened: Kalshi, Robinhood, and others face 20+ lawsuits over sports prediction markets
• The damage: Nevada, New Jersey, Maryland, and more have moved to block these platforms
• Why you should care: If prediction markets win, you can bet sports in all 50 states via "derivatives"
• The move: Watch the courts in 2026—this might end up at the Supreme Court

What's Actually Happening

Prediction markets let you buy contracts on real-world events. Will the Chiefs beat the Raiders? Buy a "yes" contract if you think they will. The price reflects probability—$0.60 means the market thinks there's a 60% chance.

If you're right, each contract pays $1. If you're wrong, you lose your stake.

Sound like sports betting? State regulators agree. They say Kalshi, Robinhood, and others are running unlicensed sportsbooks using financial derivatives as a loophole.

The CFTC (Commodity Futures Trading Commission) disagrees. They say prediction markets are regulated financial instruments—derivatives—not gambling. And derivatives are federally regulated, meaning they can operate in all 50 states regardless of state gambling laws.

The Legal Battlefield

Here's where things stand:

Nevada, New Jersey, and Maryland have issued cease-and-desist orders against Kalshi for offering sports prediction markets. Kalshi has responded with lawsuits.

Coinbase has filed suits against Connecticut, Illinois, and Michigan challenging their attempts to restrict sports event contracts.

30+ states and Washington D.C. have filed amicus briefs supporting state authority, arguing these products are gambling and should be regulated state-by-state.

Robinhood now offers prediction markets in all 50 states through Kalshi's CFTC-regulated exchange. Nevada kicked them out in December 2025. Maryland has restricted access.

Why This Matters to You

If prediction markets win: You could trade sports contracts in all 50 states, even where sports betting is illegal. Ohio degen who can't drive to a legal state? Just open Robinhood and trade NFL contracts.

If states win: Prediction markets get classified as gambling and subject to the same patchwork of state laws that govern sportsbooks. The nationwide platform dream dies.

The CFTC under Trump's new leadership seems friendly to prediction markets, but they're not fighting the state lawsuits directly—they're just continuing to allow self-certification while courts sort it out.

The Polymarket Factor

Remember Polymarket? The crypto prediction market that U.S. residents couldn't use for years because of CFTC enforcement?

They're back. In January 2026, Polymarket relaunched for U.S. users after becoming CFTC-compliant. The DOJ and CFTC ended their probe in July 2025.

Polymarket's return adds another player to a market that's already crowded with DraftKings, FanDuel, Kalshi, Robinhood, and Crypto.com all fighting for position.

What Happens Next

Legal experts expect this to take years to fully resolve. Some predict a Supreme Court case by 2027 or 2028 to definitively answer whether sports prediction markets are gambling or derivatives.

In the meantime, the patchwork continues. You can trade sports contracts in most states through Robinhood. You can't in Nevada. Maybe Maryland. Depends on the day and which injunction is in effect.

FanDuel and DraftKings both launched their own prediction market apps in late 2025, but they're being more cautious than Kalshi about where they operate and what events they offer.

The Bottom Line

This isn't just a legal fight—it's a battle over the future of American gambling. If prediction markets establish themselves as federally regulated derivatives, the state-by-state sports betting model crumbles.

Imagine being able to bet on any sport, any game, any event, from any state, through a standard brokerage account. That's what's at stake.

2026 will be the year we find out whether that future arrives or gets killed in the courts.

Grab your popcorn. This is going to get messy.