11 States Take Aim at Prediction Markets

Kalshi, the federally licensed prediction market platform, is now battling regulators in eleven states simultaneously — a pressure campaign that has sparked the most serious legal confrontation the young industry has ever faced and is rapidly accelerating calls for a federal resolution. From Nevada's temporary ban to Arizona's criminal charges filed just days apart in March 2026, the state-by-state crackdown is less a coordinated legal strategy than a race to claim jurisdiction over what could become a massive, mostly untaxed market.

Nevada Fires First — A Historic 14-Day Ban

On March 20, Carson City District Court Judge Jason Woodbury made Nevada the first state in the country to issue a temporary ban blocking Kalshi from operating within its borders. The Nevada Gaming Control Board brought the motion, and its chair, Mike Dreitzer, was blunt about the reasoning: prediction markets 'facilitate unlicensed gambling' and are therefore illegal under Nevada law.

Sports betting and gaming attorney Daniel Wallach put the scope of the order in plain terms — it bars Kalshi from offering 'event-based contracts relating to sports, politics and entertainment to people within Nevada without first obtaining all required licenses.' The 14-day block gave regulators a window to pursue further action. Whether that leads to a permanent prohibition or a negotiated path to licensure remains an open question.

What's striking here isn't the ban itself. It's the speed. Nevada moving first — in a state whose entire economic identity is built on gaming regulation — sent a signal to every other state attorney general watching from the sidelines.

We have a statutory duty to protect the public.

Arizona Goes Further — Criminal Charges Filed Against Kalshi

Just days before Nevada's court order, Arizona escalated even further. Arizona criminal charges Kalshi filed by Attorney General Kris Mayes targeted both Kalshiex LLC and Kalshi Trading LLC, alleging the companies ran an illegal gambling operation and accepted bets on Arizona elections — a specific category of wager that Arizona law bans outright.

The complaint alleged Kalshi 'accepted bets from Arizona residents on a wide range of events,' including professional and college sports contests, proposition bets on individual player performance, and even whether the SAVE Act would become law. Sports wagering in Arizona requires a gaming license. Election betting has no path to legal status at all under current state law.

Criminal charges against a federally regulated financial exchange are rare. That Arizona chose this path rather than a civil cease-and-desist — the route most other states took — tells you something about how aggressively Mayes' office intends to push this fight.

States like Arizona want to individually regulate a nationwide financial exchange, and are trying every trick in the book to do it. As other courts have recognized and the CFTC affirms, Kalshi is subject to federal jurisdiction.

Other States Move to Legislate — What Pennsylvania and Utah Proposed

While Nevada and Arizona swung hard, other states opted for the legislative route. In Utah, State Representative Joseph Elison put forward HB243, which would define proposition betting broadly enough to capture most of what prediction markets offer. In Pennsylvania, Representative Danilo Burgos announced plans to bring prediction markets under the Pennsylvania Gaming Control Board — and attached a specific revenue proposal to the idea.

Pennsylvania's proposed framework would include:

• A 34% state tax and 2% local share assessment on gross revenue
• A ban on underage users
• Self-exclusion lists for user protection
• Strict Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols

Who Actually Has Jurisdiction — The CFTC Question

Why are states failing to block Kalshi in court?

Not every state effort has landed. In Tennessee, Judge Aleta Trauger of the US District Court for the Middle District of Tennessee blocked a state injunction that would have prevented Kalshi from operating there. The court's reasoning cut to the heart of the whole debate: Kalshi's event contracts are 'swaps' under the Commodity Exchange Act, which gives the CFTC exclusive federal jurisdiction. States, under that reading, simply cannot override federal law.

That's the crux of what's happening here. The CFTC prediction markets regulation process is still open — the agency is currently seeking public comment on its rulemaking — and CFTC Chair Michael Selig has previously said the agency would defend prediction markets. With only one sitting commissioner, the CFTC's posture is clear but its capacity to move quickly is limited.

Aaron Brogan, founder of crypto-focused law firm Brogan Law, cut through the political noise in a recent analysis. The real reason states are pursuing prediction markets, he argued, has nothing to do with consumer harm. Under the current CEA framework, 'states will not be able to control them, and more importantly, may not be able to tax them.'

It's different from what sportsbooks and casinos offer their customers, and it should not be overseen by a patchwork of inconsistent state laws.

Is This Actually About Gambling — or Tax Revenue?

Call it what you want — consumer protection, jurisdictional clarity, public harm prevention. The subtext isn't hard to find. According to the American Gaming Association, billions of dollars in potential tax revenue are on the table across the 40 states where online sports betting is currently legal. Prediction markets, regulated at the federal level under the CEA, generate none of that state tax revenue under current arrangements.

Pennsylvania's Burgos was unusually candid about it. 'It's another opportunity to expand the tax base,' he said, while acknowledging the potential for community harm. Utah's Elison described prediction markets as operating in 'a huge gray area,' adding that 'there's lots of lawsuits all over the country right now... debating this very thing.'

Senator John Curtis of Utah introduced a federal bill called the Prediction Markets Are Gambling Act, which would amend the CEA to pull sports and casino-style event contracts out of CFTC jurisdiction — handing that authority back to states. Curtis framed it as states-rights legislation: 'Our bipartisan legislation clarifies regulatory jurisdiction, ensuring that states can maintain their authority over sports betting and casino gaming.'

According to Brogan, the Kalshi situation may ultimately be decided at the Supreme Court level if the CFTC further liberalizes prediction markets and states push back. His read: 'all that counts, through all the sound and fury, is counting to five.' Meaning five justices. That's where this is headed if no federal legislative solution emerges first.