Prediction market surge threatens $1.2 billion in tax revenue
Prediction market growth could cost the US $1.2 billion in lost tax revenue.
Event / Politics
US Prediction Market Regulation
New York files lawsuit against prediction market operator Kalshi, seeking $36 billion in penalties for operating without state licensing. Part of broader state-federal conflict over regulatory jurisdiction, with concerns about gambling, insider trading, and tax revenue.
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2026-08-14 to 2026-11-11 · UTC publication dates
Coverage begins 1 Aug, 00:48 UTC
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What happened
Hochul signs executive order banning state employees from prediction market insider trading
In April 2026, New York Governor Kathy Hochul signed an executive order prohibiting state employees from engaging in insider trading on prediction markets, though this practice was already outlawed by federal law and platform rules.
Gaming Commission issued cease-and-desist to Kalshi
New York's Gaming Commission sent Kalshi a cease-and-desist letter in October 2025, accusing the company of operating an unlicensed mobile sports wagering platform.
New York filed lawsuits against Coinbase and Gemini Titan prediction platforms
In April 2026, New York Attorney General Letitia James sued Coinbase Financial Markets and Gemini Titan, alleging that their prediction market platforms violated state gambling laws similar to the allegations against Kalshi.
American Gaming Association estimates $1.2 billion tax revenue loss from prediction markets
The American Gaming Association, representing the U.S. casino industry, estimated that evasions of state and tribal gambling laws through prediction markets have siphoned more than $1.2 billion in gaming tax revenue from critical community initiatives across America.
New York sues Kalshi for operating illegal gambling operation
New York Attorney General Letitia James and Governor Kathy Hochul announced a lawsuit against prediction market operator Kalshi, claiming the company is running an illegal gambling operation without obtaining a license from the New York State Gaming Commission. The lawsuit alleges Kalshi violated state gambling laws by allowing residents to place wagers on sports, elections, and other events.
Federal courts rule against state bans on prediction markets
The 3rd Circuit Court of Appeals granted Kalshi an injunction against New Jersey regulators blocking enforcement of a ban on wagers on collegiate sports. A Minnesota federal court similarly ruled in Kalshi's favor, preventing the state from enforcing its ban on prediction markets, finding that federal law expressly preempts statewide bans on prediction markets.
CFTC sued New York in April over prediction market regulation
The U.S. Commodity Futures Trading Commission filed a lawsuit against New York in April to stop the state from applying its gambling laws to prediction markets, claiming federal law grants the CFTC exclusive jurisdiction over the platforms.
Prediction market trading volume surges since 2024 election
Combined monthly global trading volume on Kalshi and Polymarket increased from less than $5 billion in September 2025 to approximately $24 billion as of April 2026, following the 2024 U.S. presidential election when prediction markets outperformed pollsters in predicting Donald Trump's victory.
Four states have won court orders restricting Kalshi operations
Massachusetts, Michigan, Nevada, and Washington have all won court orders restricting Kalshi's activities within their respective states.
New York seeks $36 billion in penalties and restitution from Kalshi
New York's lawsuit seeks $100,000 in penalties for each offering or attempt to offer sports gambling by Kalshi in the state, totaling at least $36 billion according to court filings. The state also seeks triple the amount of revenue Kalshi generated in New York, full restitution to customers who used the platform, and permanent cessation of operations in the state.
Trump administration appears unlikely to regulate prediction markets
The Trump administration appears unlikely to take regulatory action against prediction markets, particularly considering the president's close personal ties to the industry. Donald Trump Jr. serves as an advisor to both Polymarket and Kalshi prediction market platforms.
Kalshi allowed users under legal gambling age of 21 to use platform
New York authorities alleged that Kalshi permitted individuals aged 18 to 20 to access its prediction market platform, violating state law which establishes 21 as the minimum age for mobile sports betting. The lawsuit cited this as exposing minors to serious personal and financial risk.
Trump teleprompter operator accused of insider trading on Kalshi
President Donald Trump's longtime teleprompter operator was accused of earning tens of thousands of dollars by placing bets on Kalshi based on advance knowledge of what the president would say during broadcasts, leading to the operator's removal from duty.
CFTC files emergency motion to block New York enforcement against Kalshi
The U.S. Commodity Futures Trading Commission filed an emergency motion in Manhattan federal court to stop New York's enforcement actions against Kalshi, arguing that federal law gives the CFTC exclusive jurisdiction to regulate prediction markets and that New York's actions constitute regulatory overreach.
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2 alternative perspectives
Federal prosecutors charge Trump aide with insider trading on prediction market
Trump aide charged with insider trading on Kalshi; New York bans state employee insider trading in prediction markets.
Federal regulator challenges New York's prediction market crackdown
Federal and state regulators clash as CFTC moves to block New York's prediction market enforcement.
New York escalates enforcement against prediction market platforms
New York sues prediction market platforms for illegal gambling, seeking $36 billion in penalties.