19 Sep 2026
Casino Operators Push Back as Courts Affirm State Authority Over Event Contracts
Legal disputes between established casino companies and prediction market platforms have intensified throughout 2026, with operators and state regulators filing suits while also pressing lawmakers for tighter restrictions on platforms such as Kalshi and Polymarket. These platforms operate under Commodity Futures Trading Commission oversight as event contracts, a structure that distinguishes them from traditional gambling products, yet recent rulings have opened pathways for states to treat the contracts as gambling activity subject to local rules.
The Ninth Circuit Court of Appeals issued a unanimous decision on August 29, 2026 that permits states to regulate these platforms under gambling statutes, a development that followed several earlier court victories for casino interests and regulatory agencies. Observers note that the ruling addresses ongoing questions about whether CFTC-approved contracts fall outside state gambling laws or remain subject to them when they involve sports outcomes and election results.
Key Court Developments Shape the Landscape
Multiple federal and state court decisions throughout the year have favored arguments from casino operators who claim that prediction markets divert revenue from licensed sports betting operations and reduce associated tax collections. Those decisions have built momentum for further litigation, and the Ninth Circuit opinion now provides clearer precedent that states can assert jurisdiction over platforms offering event contracts tied to sports and political events. Data from industry reports show that platforms recorded billions in trading volume on sports-related contracts alone during the 2025-2026 period, figures that highlight the scale of activity now under legal scrutiny.
State regulators have coordinated with casino trade groups to argue that event contracts function similarly to wagers, even though the platforms maintain CFTC registration and compliance frameworks. The American Gaming Association has tracked commercial gaming revenue across states, and its State of the States 2026 report details how sports betting taxes contribute to state budgets, information that regulators have cited in filings against prediction platforms.
Lobbying Efforts Target Congress and Statehouses
Bipartisan legislation introduced in Congress seeks to clarify the boundary between CFTC-regulated contracts and state-controlled gambling, with proposals that would require platforms to obtain state licenses or face restrictions on contracts involving sporting events. Lawmakers have held hearings where casino representatives presented data on revenue shifts, while platform executives countered with evidence of distinct market structures that rely on settlement mechanisms different from traditional bookmaking. Those hearings have drawn attention to the growing volume of trading on election-related contracts as well, prompting additional scrutiny from both parties.
Platform operators report that trading activity has expanded rapidly, with billions flowing through sports contracts during major league seasons, yet the legal environment now requires them to monitor state-by-state developments following the Ninth Circuit decision. Several platforms have adjusted product offerings in certain jurisdictions while continuing to operate under federal oversight elsewhere, a situation that creates operational complexity for companies structured around nationwide event contracts.
Revenue Concerns Drive Industry Response
Casino operators have documented cases where prediction market volume overlaps with sports betting markets, and they have presented these overlaps to regulators as direct competition that bypasses state licensing and tax requirements. The American Gaming Association report links sports betting growth to state revenue streams, and regulators have referenced those connections when advancing new rules or supporting litigation. Multiple states have initiated administrative proceedings to classify certain event contracts as gambling products, actions that align with the direction set by the Ninth Circuit.
Additional court wins for state regulators have occurred in districts outside the Ninth Circuit, reinforcing the pattern of decisions that allow states greater latitude to oversee platforms offering contracts on sports and elections. These rulings have encouraged further lobbying at both federal and state levels, with casino associations coordinating efforts to introduce licensing mandates or volume caps on certain contract types.
Platforms Maintain CFTC Compliance While Facing New Rules
Prediction market companies continue to emphasize their registration with the Commodity Futures Trading Commission and the use of clearing mechanisms that differ from traditional gambling settlement. Nevertheless, the August 2026 Ninth Circuit ruling has shifted the practical landscape, and platforms now navigate a patchwork of state requirements while federal legislation remains under consideration. Congress has advanced draft bills that would establish clearer federal preemption standards or, alternatively, defer more authority to states depending on the final language adopted.
Conclusion
The combination of the Ninth Circuit decision, additional court rulings, and pending congressional measures has created an evolving regulatory environment for event contract platforms. Casino operators and state agencies have used litigation and legislative channels to address perceived revenue impacts, while platforms track trading volumes that reach billions on sports contracts and adjust operations in response to new legal precedents. Further developments in September 2026 and beyond will determine how these overlapping frameworks settle into stable rules for both industries.