FORT WAYNE, Ind. (WOWO) — Election betting is expanding ahead of the November midterm elections, with millions of dollars changing hands on political outcomes as states challenge prediction market platforms over whether they are violating gambling laws and undermining public confidence in elections.
The growing fight centers on Kalshi and Polymarket, two major prediction market platforms that allow users to buy contracts tied to the outcomes of elections, including which party will control Congress, who will win individual races and how candidates will perform against one another.
State officials argue the contracts amount to illegal election gambling in jurisdictions where wagering on political contests is prohibited. The companies maintain that their markets fall under federal financial regulation, placing them outside the reach of state gambling restrictions.
The dispute has escalated into a broader battle over the division of regulatory authority between state governments and the Trump administration, with lawsuits, criminal charges, public warnings and competing federal court decisions shaping the industry’s future.
According to a report published Monday by the Indiana Capital Chronicle, Kalshi placed the Democratic candidate in Minnesota’s U.S. Senate race at an 87% chance of winning on Friday morning, with trading volume on the outcome exceeding $1.8 million. On Polymarket, traders gave Democrats a 90% chance of winning control of the U.S. House following the midterms.
The markets also offer contracts on comparisons between races, including whether Kansas or Nebraska’s U.S. Senate contest will produce a larger margin of victory. The growing volume of election-related trading has alarmed public officials and civic watchdog groups, who argue that financial incentives tied to election outcomes could threaten the integrity of the democratic process.
Minnesota state Representative Emma Greenman, a Democrat and leading advocate for restrictions on prediction markets, said the platforms risk damaging public confidence in both government and elections.
“They jeopardize people’s trust in government and government decision-making. They jeopardize people’s trust in elections,” Greenman said.
Greenman helped lead Minnesota’s effort to enact what was described as the nation’s first near-total ban on prediction markets earlier this year. A federal judge subsequently blocked the law before it could take effect, following lawsuits brought by the Commodity Futures Trading Commission, Kalshi and Polymarket.
The National Conference of State Legislatures, in data analyzed by the Pew Research Center, found that 23 states completely prohibit betting on elections. State officials have increasingly questioned whether the emergence of federally regulated prediction markets creates a way for companies to circumvent those restrictions.
Benjamin Schiffrin, director of securities policy at Better Markets, a nonprofit watchdog organization focused on consumer and investor financial protections, argued that election wagering changes the nature of political participation by introducing a financial incentive into the outcome.
“It’s supposed to be a civic duty where people are deciding what candidate they actually think is best for a leadership position, not what candidate can make them the most money if they bet the right way,” Schiffrin said.
The prediction market industry disputes the characterization of its products as gambling. Companies argue that users trade event contracts that pay out when specified outcomes occur, making the products similar to swaps and other financial instruments used to manage risk.
The distinction is central to the legal fight. Traditional swaps are financial contracts that can help investors and businesses offset exposure to events such as changes in interest rates or other economic conditions. Critics argue that election and sports contracts are fundamentally different because they allow users to profit from the outcome of contests without serving a comparable risk-management purpose.
The Commodity Futures Trading Commission, the federal agency responsible for overseeing derivatives markets, maintains that it has authority over prediction markets under the federal Commodity Exchange Act.
Polymarket said in a statement that “prediction markets are regulated by the Commodity Futures Trading Commission under a federal framework, not a patchwork of state rules.”
Kalshi did not respond to a request for comment from States Newsroom, the news organization that includes the Indiana Capital Chronicle.
In a March court filing, Kalshi’s attorneys argued that its event contracts qualify as swaps and that contracts tied to elections and sports fall within that legal definition. The company contended that political outcomes can have direct financial consequences, supporting its position that the contracts belong under federal financial oversight.
The Trump administration has sided firmly with the industry. CFTC Chairman Michael Selig, appointed by President Donald Trump in 2025, has taken a favorable position toward prediction markets. The commission, which normally has five members, currently has only Selig serving as a commissioner.
In June, the CFTC proposed a regulatory framework for event contracts that would continue to permit trading on election outcomes. On Friday, the agency unveiled another proposed rule that would expressly define event contracts, including those involving political outcomes, as swaps.
Selig defended the agency’s authority in a Friday news release, arguing that the products fall squarely within federal jurisdiction.
“Americans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events,” Selig said. “These products are commodity derivatives squarely within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction.”
The proposed federal approach has drawn objections from organizations concerned about election integrity. In a July 27 letter to the CFTC, 16 civic watchdog groups, including Better Markets, Common Cause and Citizens for Responsibility and Ethics in Washington, urged the commission to prohibit election-related contracts.
The groups argued that allowing people to profit from election outcomes could create incentives for interference and threaten public confidence in the electoral process.
“Event contracts that involve elections allow individuals to bet on elections, which is illegal under many state laws. This election betting would incentivize election interference and has the potential to undermine the integrity of our democracy,” the groups wrote.
The CFTC did not respond to questions from States Newsroom about the concerns.
In Maryland, election officials have warned residents that prediction market contracts may violate the state’s prohibition on election gambling, even when the platforms remain accessible online.
Jared DeMarinis, Maryland’s state administrator of elections, said the contracts conflict with the plain meaning of the state’s law. The Maryland State Board of Elections issued a public warning in March cautioning that betting on elections through prediction markets could violate state law.
DeMarinis said the industry is still developing, giving states an opportunity to address election wagering before it becomes more firmly established. He is particularly concerned about the potential expansion of betting before the 2028 presidential election.
“This is kind of like a watershed moment. You can kind of end it before it proliferates,” DeMarinis said.
In July, DeMarinis asked the Maryland Office of the State Prosecutor to investigate the legality of election-related wagering on prediction markets. State Prosecutor Charlton Howard said in an email that his office does not comment on the existence or status of an investigation unless it results in criminal charges.
Wisconsin officials have issued similar warnings. The Wisconsin Elections Commission released a public advisory in July urging voters not to gamble on elections through platforms including Kalshi and Polymarket.
The commission cautioned that residents who wager on an election and then vote in that contest could face a future challenge to their eligibility to vote. Commission administrator Meagan Wolfe said voters need to understand the potential consequences of betting on an election outcome. The commission declined to make Wolfe available for an interview.
Arizona has taken a more aggressive approach, filing criminal charges against Kalshi in March. Democratic Attorney General Kris Mayes accused the company of accepting bets from Arizona residents in violation of state law, including wagers involving sports, the 2028 presidential election and state-level contests scheduled for 2026.
Kalshi filed a preemptive lawsuit in federal court challenging the prosecution. In May, U.S. District Court Judge Michael T. Liburdi, an appointee of President Trump, issued an order halting the case.
Liburdi concluded that Kalshi was likely to demonstrate that federal law governing swaps preempts Arizona’s gambling restrictions as applied to the company’s contracts. In his ruling, he compared election and sports contracts with weather-related financial products, which the CFTC has treated as swaps because weather conditions can have commercial consequences for businesses and investors.
The judge wrote that the potential for event contracts to offset financial exposure supported the connection between those events and commercial consequences.
The ruling temporarily strengthened the industry’s argument that federal regulation takes precedence over state gambling laws, although the broader legal dispute remains unresolved.
Conflicting decisions from federal appeals courts have further complicated the issue. The 9th U.S. Circuit Court of Appeals has sided with states in finding that federal law does not necessarily override state-level gambling restrictions. The 3rd U.S. Circuit Court of Appeals, by contrast, has upheld the CFTC’s exclusive authority over event contracts.
The disagreement could ultimately bring the issue before the U.S. Supreme Court.
New Jersey petitioned the high court in September to review whether federal law prevents states from regulating sports wagers offered through prediction markets registered with the CFTC. Although that case centers on sports betting, the justices’ decision could establish principles that also affect election-related contracts.
The Supreme Court has not decided whether to take up the case. A ruling resolving the disagreement between the appeals courts could determine how far state governments can go in regulating prediction markets operating under federal oversight.
The legal conflict also has roots in the 2024 election cycle. The CFTC attempted to prevent Kalshi from offering contracts on which political party would control Congress, but an appeals court allowed the company to proceed in the final weeks before Election Day.
Schiffrin said election contracts and sports contracts share the same essential characteristic: both allow users to wager on the outcome of a contest.
“You’re betting on the outcome of a contest. It should be considered gambling, no different than if you’re betting on the outcome of a sporting event,” he said.
Minnesota’s legal battle illustrates the limits states may face as they attempt to impose their own restrictions. The state enacted its broad prohibition on prediction markets earlier this year, but U.S. District Court Judge Katherine Menendez, an appointee of former President Joe Biden, blocked the ban in July after the CFTC, Kalshi and Polymarket challenged it.
Menendez ruled that federal law likely preempts Minnesota’s restrictions on many of the contracts offered through prediction markets. The state prohibits election gambling and has not legalized sports betting, making the dispute particularly significant for officials who want local voters to decide whether such wagering should be allowed.
Greenman said those decisions should remain with the people of Minnesota rather than being dictated by a federal regulatory framework. “We should be rebuilding trust in government decision-making, that the public’s heart — the public’s interest — are what sit at the center,” Greenman said.
With the midterm elections approaching, the immediate question is whether states can enforce existing gambling prohibitions against platforms that claim exclusive federal protection. The longer-term question is whether prediction markets will become a permanent part of American elections, with the outcome of ongoing litigation likely to shape the rules governing political wagering well beyond November.
