In April 2026 New York Attorney General Letitia James filed a series of lawsuits against two companies offering prediction markets in the state. That is part of a wider legal battle nationally, and in New York, over the entire model of prediction markets and event contracts. But one part in particular that has got state regulators in a twist is sports betting contracts.
Prediction markets, which offer event contracts where people put money on predicting either a yes or no answer on an almost endless variety of questions. Will the US confirm aliens exist by June 30? What will be the #1 song on Spotify this week? Number of republican senate seats after the elections? All of these are current markets that you can put money down on predicting right now.
But crucially, because of the financial contract buying and selling elements, federal law does not classify this as gambling.
These markets have boomed in the past two years, going from niche business to multi-billion dollar yearly market. The 2024 Presidential Election really put them in the spotlight, with traders putting down and making or losing millions on President Trump’s victory. The big two operators Kalshi and Polymarket now dominate the sector – but many new competitors have recently got involved.
For example, consider a ranking of the top prediction market sites currently operating by Covers.com. This kind of online resource shows exactly how many new operators have launched in the space in the past year alone. New and experienced traders use them to compare sites on features like the markets available, payment speeds and welcome offers.
The real boom in use, and number of competitors, began with sports contracts however. prediction markets started offering event contracts like “Will Lamar Jackson get sacked for the Ravens in the next quarter?”, they quickly noticed how profitable these markets could be. But state gambling regulators also began to take notice.
By some estimates up to 89% of Kalshi’s revenues now come from sports contracts. This challenges the model of a state like New York ,which makes more than a billion dollars a year in legal sports betting taxes.
So, states have pushed back. Lawsuits were beginning to pile up against the big operators, but because of the support of the Commodity Futures Trading Commission the fight has now gone national.
AG James’ recent lawsuit was not against Kalshi or Polymarket, which for now continue to operate in the state, but against Gemini and Coinbase. Two crypto currency exchanges that have recently launched their own prediction markets that operate in New York.
The state also took the step, alongside many others with legal sports betting, of ensuring that any licensed operators of sports betting in the state would not be allowed to offer sports contracts on their prediction markets – or risk jeopardising their lucrative NY sports betting licenses.
Prediction Markets Hit Back with Support of the CFTC
However, against all that the prediction markets are fighting back. The case against sports betting contracts and what that means for markets across the US will now be played out in the country’s highest courts.
Then there’s the elephant in the room of Kalshi and Polymarket’s deep pockets and political connections. Some of which are already being used to further cement themselves into the national and local economy. For example, Kalshi recently signed a promotional partnership deal with iconic New York City entertainment venue Madison Square Garden.
Both companies markets are regularly promoted in sports and other media such as Kalshi’s partnership with film review site Rotten Tomatoes to offer live prediction market-led data on potential winners.
They market themselves as “truth engines” – because, the theory goes, people are more accurate when asked to put money down over just polling questions.
However, the accuracy of these claims is heavily debated. Plus, the arrival of the first proven case of insider trading on these market in recent weeks, as well as a host of other alleged events, has led to fresh concerns about the legitimacy and fairness of the entire concept.
Despite all that, they have been heavily embraced by government and media in many ways. Donald Trump Jr. is a key adviser to both Kalshi and Polymarket, and the new CFTC head has come out guns blazing and filed a lawsuit against New York’s efforts.
Results have so far been mixed. New Jersey and Nevada are traditionally the hubs of US gambling (although New York now has them both beat on sports betting handle) and both states have attempted to block Kalshi from offering contracts in their state without a local license.
Nevada has a restraining order on Kalshi offering event contracts in the state, which was recently upheld by a local judge. Kalshi has actually complied with this. However, in New Jersey the United States Court of Appeals for the Third Circuit has ruled in favor of Kalshi.
These complicated results show why New York might not yet be going after the two biggest prediction markets and their sports contracts. But if their efforts against Coinbase and Gemini succeed, they may well try in the future.
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