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Prediction Markets vs US Sportsbooks – Kalshi's $10 Billion Month
On Super Bowl Sunday 2026, Kalshi cleared over $1 billion in trading volume – up 2,700% year on year. In the thirty days around that game, the prediction market platform handled $10.3 billion. None of it touched a licensed sportsbook, and a federal court just said that is fine.
The fight over whether Kalshi and Polymarket are regulated commodity exchanges or unlicensed sportsbooks dressed in fintech clothing is the most disruptive regulatory story in US gambling right now. It pits the Commodity Futures Trading Commission against state gaming boards, turns sports contracts into swaps under federal law, and has already wiped billions off DraftKings and Flutter Entertainment's market cap. We tracked what happened, who is suing whom, and where the money is actually going.
The Numbers That Broke the Sportsbook Model
Prediction markets were a curiosity two years ago. In early 2026 they are a parallel sports betting economy that sits outside every state gaming regulator in the country. The volume is the whole story.
Kalshi's Super Bowl week ended at $2.8 billion in trading. Football alone accounts for roughly 90% of the platform's recent sports volume. NFL-related event contracts peaked at $720 million across the season, with a single game pulling over $100 million. The company's most recent raise valued it at around $11 billion.
Polymarket is larger in total. In the twelve months ending February 2026, the platform processed $36.2 billion in trades, with sports making up 38% – roughly $13.8 billion and climbing. Polymarket received its CFTC Amended Order of Designation in November 2025 and has been expanding into the US market since.
| Platform | Key Metric | Value |
|---|---|---|
| Kalshi | Super Bowl Sunday volume | $1.0B+ (up 2,700% YoY) |
| Kalshi | Super Bowl week volume | $2.8B |
| Kalshi | 30-day volume around Super Bowl | $10.3B |
| Kalshi | Company valuation | ~$11B |
| Polymarket | Trailing 12-month volume | $36.2B |
| Polymarket | Sports share of volume | 38% (~$13.8B) |
Key Takeaway
Kalshi went from a niche political betting app to clearing more monthly sports volume than some state-licensed sportsbooks in under 18 months. The growth is not theoretical anymore, and the sportsbooks have noticed.
How the Loophole Works
Traditional US sportsbooks operate under state gaming licenses. DraftKings, FanDuel, BetMGM, and every other regulated book must secure a licence from each state where it accepts bets, pay state taxes, enforce age and geolocation rules under state law, and answer to a state gaming control board.
Prediction markets sidestep all of that. Kalshi and Polymarket are designated contract markets registered with the Commodity Futures Trading Commission under the federal Commodity Exchange Act. They list "event contracts" – binary yes/no instruments that pay out based on the outcome of a future event. A contract on whether the Kansas City Chiefs win the Super Bowl is, in CFTC terms, structurally the same as a weather derivative or a crop-yield swap.
The legal claim is that these are not bets, they are swaps. Swaps are federal. Federal law preempts state gambling statutes. Therefore state gaming boards have no jurisdiction. That is the argument the CFTC has taken into federal court, and so far it is winning.
The State-by-State Enforcement Fight
State regulators saw the volume and moved fast. The count through early April 2026:
- New Jersey issued a cease-and-desist to Kalshi, arguing the contracts violated state gambling statutes including the ban on collegiate wagering
- Nevada Gaming Control Board filed a civil complaint against Polymarket in January 2026 seeking to block the platform from Nevada residents without a state licence
- Maryland issued a cease-and-desist to Kalshi
- Tennessee's Sports Wagering Council ordered Polymarket to stop serving residents
- Arizona, Connecticut, and Illinois took enforcement actions that the CFTC then sued on 2 April 2026, arguing the states were intruding on federal jurisdiction
The Third Circuit Court of Appeals ruled 2-1 in early April 2026 that New Jersey cannot bring an enforcement action against Kalshi because the company's sports event contracts fall under the federal Commodity Exchange Act rather than state gambling law. That is the most important ruling in the entire fight. It is not a final judgment, but it sets the template: if the pattern holds at the circuit level, states lose.
Heads Up
Different district courts have issued conflicting rulings on whether state gaming boards can enforce against CFTC-designated contract markets. The Third Circuit decision is the first appellate-level win for the federal-preemption argument, and it carries real weight heading into further appeals.
How DraftKings and FanDuel Are Reacting
The licensed sportsbooks are not watching this happen passively. They are building their own prediction market products and bracing for margin compression.
DraftKings launched DraftKings Predictions in December 2025. On Super Bowl Sunday the app ranked second in category downloads – but far behind Kalshi. Handle growth at the core sportsbook slowed to 4% year on year in January 2026, down from 11% in the same month a year earlier. The company issued cautious 2026 guidance that fuelled a stock selloff, and analysts have pegged the prediction market as a $10 billion opportunity – or threat, depending on which side of the table you are on.
FanDuel's parent Flutter Entertainment is projecting up to $300 million in adjusted EBITDA losses in 2026 as it invests in its prediction market platform. Analysts estimate DraftKings' competitors will spend $200–300 million this year building out the category. Both DraftKings and FanDuel broke with the American Gaming Association over its position on prediction markets – a split that matters because the AGA has spent years lobbying state legislators on behalf of licensed operators.
The message from the sportsbooks is clear. They are hedging. They do not believe the regulatory fight will end in time to protect their state-licensed handle, so they are building federal-law products themselves.
Federal Legislation and What It Would Take to Kill It
Senators Adam Schiff (D-CA) and John Curtis (R-UT) introduced the Prediction Markets Are Gambling Act on 23 March 2026. The bill amends the Commodity Exchange Act to prohibit CFTC-registered platforms from listing sports event contracts. It is the clearest legislative attempt to close the loophole at the federal level.
The odds of it passing are low. Traders on Polymarket itself are pricing a 90.5% implied probability against any federal ban on sports prediction markets in 2026. The political coalition needed – bipartisan, willing to overrule the CFTC, unified on what counts as "gambling" under federal commodities law – does not exist yet. Sports leagues are split. The MLB signed a deal with Polymarket on 19 March 2026 that includes a pact with federal regulators to "protect the integrity of baseball." That is the opposite of a league calling for an outright ban.
Absent federal legislation, the fight stays in the courts. And the courts, for now, are siding with the CFTC.
What This Means for Players
Prediction markets are already serving US sports bettors who want an alternative to state-licensed books. The practical differences worth knowing:
- No geographic restrictions within the US. A Kalshi or Polymarket account works across state lines. State-licensed sportsbooks do not.
- No state-specific bonuses or promos. Prediction markets offer trading interfaces, not sportsbook-style welcome bonuses.
- Liquidity risk on smaller markets. Volume concentrates in NFL, NBA, and major props. Niche events can have thin books.
- No state consumer protections. If a dispute arises, CFTC arbitration replaces the state gaming board process. There is no state regulator to call.
- Tax treatment is unsettled. Event contract winnings may be taxed differently from traditional gambling winnings. Accountants are still working through the implications.
For players who only bet on casino games, the prediction market story is adjacent rather than direct. Our US-relevant casino reviews cover operators that hold state gaming licences and are not affected by the CFTC framework. The prediction market fight matters to sports bettors first, and to the sports betting industry's overall margin structure second.
Where This Goes Next
Three things to watch through the rest of 2026:
- Further appellate rulings. The Third Circuit decision is the template. If other circuits agree, state enforcement collapses. If one circuit splits, the Supreme Court takes the case.
- CFTC rulemaking on sports event contracts. The CFTC has jurisdiction but has not issued formal rules on what sports contracts can and cannot list. Rulemaking would settle the "are these really swaps" question one way or the other.
- Sportsbook operator consolidation. If prediction markets keep taking handle and state-licensed operators face a 40% UK-style tax at home (see our UK gambling tax report for what that looks like in a mature market), expect M&A activity, licence surrenders in smaller states, and more aggressive hybrid products.
The structural point is that the US now has two parallel sports betting markets – one state-licensed and heavily taxed, one federally regulated as a commodity exchange and exempt from state gambling law. That situation is unstable. Either Congress intervenes, the courts force convergence, or the regulated sportsbook industry gets restructured around the new reality. None of those outcomes arrive quietly.
FAQ
Are Kalshi and Polymarket legal in the US?
Both platforms hold CFTC designations as regulated contract markets. Kalshi operates across the US under federal commodities law, and a federal appeals court ruled in April 2026 that New Jersey cannot bring a state gaming enforcement action against it. Polymarket received CFTC approval in November 2025 but faces active state-level challenges in Nevada, Tennessee, and elsewhere. Federal legality is not in serious dispute. State-level enforcement is where the fight is.
How are prediction markets different from sportsbooks?
A sportsbook takes your wager and holds the other side. A prediction market matches buyers and sellers of event contracts – you are trading a binary instrument with another user, with the platform acting as an exchange. Pricing moves with order flow, there are no fixed odds posted by a bookmaker, and you can sell your position before the event resolves. Functionally the payout on "will Team A win" looks a lot like a moneyline bet, which is the source of the regulatory fight.
Can I use Kalshi or Polymarket from any state?
In practice, yes. Both platforms are accessible to US users nationwide under their CFTC registrations. State cease-and-desist orders have been challenged in federal court, and most have been blocked or stayed pending litigation. This could change if a state wins an appellate ruling or if Congress passes the Prediction Markets Are Gambling Act.
Do DraftKings and FanDuel offer prediction markets?
Both do. DraftKings Predictions launched in December 2025 and FanDuel followed shortly after. These products compete directly with Kalshi and Polymarket and operate under the same CFTC framework rather than state sportsbook licences – which is the whole point. The licensed operators are hedging against the possibility that federal-law prediction markets keep taking share from state-licensed sportsbooks.
Will Congress ban sports prediction markets?
The Prediction Markets Are Gambling Act was introduced in March 2026 but faces long odds. Polymarket traders themselves are pricing the probability of a federal ban passing in 2026 at under 10%. Sports leagues are split – the MLB has signed a partnership with Polymarket. Without clear bipartisan momentum, the bill is more likely to shape the debate than become law.
Sources
[1] CNBC – New Jersey cannot regulate Kalshi's prediction market, U.S. appeals court rules — https://www.cnbc.com/2026/04/07/new-jersey-cannot-regulate-kalshis-prediction-market-us-appeals-court-rules.html
[2] PYMNTS – Appeals Court Rules CFTC Has Exclusive Jurisdiction Over Event Contracts — https://www.pymnts.com/legal/2026/appeals-court-rules-cftc-has-exclusive-jurisdiction-over-event-contracts
[3] CNBC – Kalshi says Super Bowl trading volume surpassed $1 billion — https://www.cnbc.com/2026/02/10/kalshi-super-bowl.html
[4] Gaming America – Kalshi Super Bowl Surge Pushes Platform Past $10 Billion In 30 Days — https://gamingamerica.com/news/1006799/kalshi-hits-10-billion-in-monthly-trading-volume-during-super-bowl-run
[5] Fortune – MLB embraces prediction markets with Polymarket deal — https://fortune.com/2026/03/19/mlb-polymarket-prediction-markets-deal-cftc/
[6] The Block – Polymarket faces first state-level cease-and-desist from Tennessee — https://www.theblock.co/post/385002/polymarket-faces-first-state-level-cease-and-desist-from-tennessee-weeks-after-us-relaunch-report
[7] Gambling Insider – Is Polymarket Legal in the U.S. in 2026? — https://www.gamblinginsider.com/in-depth/106291/is-polymarket-legal-in-the-us
[8] PYMNTS – DraftKings Sees Slower 2026 Growth Despite $10 Billion Prediction Market Opportunity — https://www.pymnts.com/earnings/2026/draftkings-sees-slower-2026-growth-despite-10-billion-prediction-market-opportunity/
[9] Covers – FanDuel Prepared to Invest Heavily in Prediction Markets — https://www.covers.com/industry/fanduel-prepared-to-invest-heavily-in-prediction-markets-february-26-2026
[10] Front Office Sports – Gambling stocks, prediction markets, DraftKings, FanDuel, Kalshi, Polymarket — https://frontofficesports.com/gambling-stocks-prediction-markets-draftkings-fanduel-kalshi-polymarket/