Depending on the day, or perhaps even the hour of the day, you could be forgiven for believing that either the end is nigh or nowhere near for prediction markets and their sports event contracts.
Take just this past week, wherein there were numerous legal setbacks, a massive acquisition announced, and then also additional rules laid out for prediction markets and what many state gambling regulators view as just sports betting by another name.
If you only saw one of those headlines, you might think “gee, that looks pretty good/bad” for prediction markets. And if you tried to absorb it all and come to a conclusion about what it all means, it might drive you mad.
But, if you squint hard enough, there's a big picture here. And every little piece of news is a brushstroke on that canvas.
- Prediction markets face legal challenges from states, but ongoing investments, partnerships, and new CFTC rules suggest many industry players expect them to remain a significant business.
- The outcome of lawsuits involving Kalshi, the CFTC, and other operators is uncertain, with courts delivering mixed rulings and some experts cautioning that no one knows how the legal battles will end.
- Despite the uncertainty, strong consumer demand and the (perhaps more hopeful than real) potential for prediction markets beyond sports are driving continued growth and regulatory attention.
On Friday, for example, New York uncorked a lawsuit against Kalshi that seeks to essentially shut down the prediction market operator altogether. That came after Kalshi and its federal regulator, the Commodity Futures Trading Commission (CFTC), struck out in trying to stop that sort of lawsuit from coming.
The Kalshi case in New York is not decided yet, but it will obviously have significant consequences for other prediction market operators. So, too, will similar legal proceedings in Nevada, Wisconsin, and Minnesota, with some good news and some bad news coming for prediction markets in those states over the past week.
New York has filed a lawsuit against prediction-market company Kalshi, alleging it runs an illegal gambling operation https://t.co/eXs6wx50aC
— The Wall Street Journal (@WSJ) July 31, 2026
Minnesota won’t get to enforce its recently passed ban on prediction markets, at least not yet. Nevada, meanwhile, has been successful in trying to restrict the exchanges. Wisconsin is getting close to something similar.
Don't sweat the massively important stuff
There is just generally a lot of suing going on right now between prediction markets, state gambling regulators, and the CFTC.
If you think you know what’s going to happen, I’d refer you to comments made earlier this year by the former general counsel of the CFTC, Rob Schwartz, who said anyone who claims to know where this is going actually has “no idea.”
So is that cause for pause? Maybe for some, but not for others.
Sheesh, U.K.-based trading provider IG Group has announced it is buying DFS/prediction market operator Underdog for around $1.3 billion.
— Geoff Zochodne (@GeoffZochodne) July 30, 2026
"Underdog has become the third-largest US prediction markets venue by US regulated notional volume flow..." pic.twitter.com/Qmdaxt1Jgp
Case in point: London-based fintech company IG Group Holdings announced on Thursday that it has agreed to pay up to $1.3 billion for Underdog, “a leading US daily fantasy sports and prediction markets operator.”
The deal "expands both our addressable market and our growth trajectory," IG CEO Breon Corcoran said in a press release.
This suggests that IG believes there is a future for prediction markets, and even sports-related prediction markets. The money involved suggests as much, too. Because why fork over a billion dollars for a business you don’t believe is gonna last?
Another not-quite-as-expensive business deal announced this week was Novig and the New York Mets forming a “multi-year partnership” that makes Novig the exclusive prediction market partner of the MLB team.
“The partnership follows Novig's recent designation as an MLB Authorized Prediction Market,” the press release said. “The designation establishes participation in MLB's integrity program, which includes collaboration on comprehensive market monitoring, reporting protocols, and restricting markets that present an integrity risk to MLB.”
So, among other things, the Mets and Novig believe this business relationship could last for years. Major League Baseball, meanwhile, believes prediction markets are going to be around long enough to merit an official seal of approval and an integrity program they can use.
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Establishing bona fides
The CFTC is also moving like somebody who believes prediction markets aren’t going anywhere.
On Thursday, the agency had a bit of news of its own to announce, which were more proposed rules for the exchanges. These rules, however, include ones that would apply to a part of the business that may be less understood, which are the ties between prediction markets and entities putting up cash to make trading possible on the exchanges.
Take Kalshi, for instance.
There is Kalshi the exchange, which matches buyers with sellers. There is also Kalshi Trading, which Kalshi describes as separate from the exchange and “a different company with completely separate operations … subject to strict informational barriers that prevent any non-public exchange information from being shared; they are a participant on the exchange just like everyone else.”
But it’s still technically tied to Kalshi, which could raise some eyebrows. Other companies have or desire similar market-making businesses, including DraftKings and FanDuel, which view it as an opportunity given their experience in sports-related betting markets.
So this is an area of prediction markets that the CFTC believes needs a few tweaks. Among other things, it's doing by proposing to “distinguish bona fide market making from directional proprietary trading.”
“Such a bona fide market maker would be a firm that is contractually obligated to maintain continuous two-sided quotations, that is filled only after unaffiliated members at every price level (even where such affiliate placed its bids or offers prior to such unaffiliated members), and that may not establish directional positions other than in connection with its obligation to maintain two-sided quotations,” the CFTC’s proposal says.
In other words, the CFTC is looking to regulate and ensure fairness and a level playing field for traders and market makers. And even if prediction market operators are doing this already, the CFTC wants this laid out and required in black and white.
But just like IG, the CFTC is also signaling that these businesses are big and sturdy enough to invest more time, money, and energy into them. And that, ultimately, they will be around long enough for these rules to matter.
CFTC says number of ties between its regulated entities (including prediction markets) and other market participants, such as market makers, keeps growing. So, proposing rules aimed at potential issues, "including with respect to perceived and potential conflicts of interest." pic.twitter.com/gfYoXXwoBl
— Geoff Zochodne (@GeoffZochodne) July 30, 2026
On the face of it, it's easy to conclude there's a disconnect between the legal dilemmas facing prediction markets and what the CFTC and industry is doing. After all, why spend so much time and money on something that is under siege in the courtroom? But then, there’s also some sense to it as well.
For one thing, nobody really knows for certain how this all shakes out legally. Maybe the Supreme Court kills sports prediction markets, but, then again, maybe it doesn’t. And there’s also the possibility that just parts of prediction markets are killed (or, again, not killed), namely, the sports side of the business.
Here today, kinda still here tomorrow
While sports accounts for the bulk of trading volume right now, some prediction market operators have always strived to be something more than that, to build up critical mass in politics, economics, and more.
“Sports have been an amazing propeller,” Kalshi CEO Tarek Mansour said in the recently released prediction market documentary on Netflix, which caused another stir and more threats of legal action.
However, Mansour also claimed in the doc that “a big chunk of users convert to other things.”
So, whether it’s IG buying a prediction market platform or the CFTC setting out rules for market makers, that acquisition and those rules could still have utility even if sports were to go away.
The football traders of today could still be the politics or interest rate traders of tomorrow, so best sign them up ASAP.
It’s also very apparent that there’s demand for what prediction markets offer, particularly on the sports side. It’s just being met now by prediction markets, and if they suddenly disappeared, that demand would be looking for a home.
Which is partly why state gambling regulators are so heated about a competing, federally regulated business springing up alongside their historical gambling verticals. It’s why sportsbook operators believe holdout states could eventually be talked into legalizing online sports betting, to try to capture some of this demand.
Press release: In what's described as the first partnership between an MLB team and a prediction market operator, @Novig is now the official prediction market partner of the New York Mets.
— Geoff Zochodne (@GeoffZochodne) July 30, 2026
Also: "...follows Novig's recent designation as an MLB Authorized Prediction Market." pic.twitter.com/zCmXnitnH4
And it’s also why, as another example, Native American tribes in California are still pursuing the legalization of online sports betting there on their terms, four years after a previous and costly effort went down in flames.
The tribes are eyeing 2028 as the year for another ballot initiative, and so much could change between then and now. If there are no sports prediction markets, the floor is yours. If there are, you can now compete for that business.
Make it make sense
Understanding prediction markets and prediction market-related news requires a kind of cognitive dissonance. Part of that is seeing people praying on their downfall and predicting their doom, while watching others predict a bright future and toss around massive amounts of money.
“[Kalshi] has reported a $22 billion valuation of its gambling business and an annualized transaction volume of $178 billion, but [Kalshi] seeks to avoid the legal and financial consequences of New York’s close regulation of gambling by offering what is quintessentially wagering under the guise of ‘event contracts’ on a ‘prediction market,’” New York’s latest lawsuit said.
That’s a pretty good summary of the situation. It says this is a big business, but also questions the legality of that business.
So the constant in all this is that prediction markets are here now, and people are increasingly using them. That leaves people trying to wrap their heads around what their presence and possible absence could mean.
They may not be easily forgiven. They may also not be easily forgotten.
“Once you give the consumer a product, it's very hard to take it away from them,” California Nations Indian Gaming Association Chairman James Siva noted during the NEXT conference in New York in March.
