The Commodity Futures Trading Commission (CFTC) made its case for federal jurisdiction over prediction market regulation during a hearing at the US District Court for the Southern District of New York on Monday, September 14, 2026. According to Law.com, Judge Lorna G. Schofield's questioning signaled skepticism about the CFTC's argument that federal law gives the agency exclusive jurisdiction over event contract trading. The CFTC sued New York in April and requested a preliminary injunction to block state authorities from enforcing gambling laws against prediction market exchange operators. Judge Schofield responded by asking counsel why an injunction is warranted when numerous courts across the US have found fault with that very premise, though the CFTC framed its pleas around federal law giving the agency exclusive jurisdiction over event contract trading.
Following Connecticut's recent enforcement action against prediction market platforms, four companies have begun working toward potentially stopping services in the state, while others remain unresponsive. According to CT Insider, Novig, ProphetX, Gemini and Webull have replied to the state's cease-and-desist orders and are in communication with Consumer Protection Commissioner Bryan Cafferelli on next steps. However, five companies - Polymarket, Coinbase, Crypto.com, Robinhood and Underdog Predict have not yet responded to the orders issued on September 10. Commissioner Cafferelli stated that the department has received "a handful of responses" to their enforcement actions, with officials working with responding companies on next steps.
Polymarket and Robinhood have both maintained that prediction markets are regulated by the Commodity Futures Trading Commission (CFTC) under federal framework, not state rules. As reported by CT Insider, a Polymarket spokesperson stated that "prediction markets are regulated by the Commodity Futures Trading Commission (CFTC) under a federal framework, not a patchwork of state rules," while a Robinhood spokesperson emphasized that "Robinhood's event contracts are federally regulated by the CFTC and offered through Robinhood Derivatives, LLC, a CFTC-registered entity." This mirrors Underdog's earlier federal preemption arguments against Connecticut officials, who argue that the company's sports event contracts fall under the Commodity Futures Trading Commission's exclusive jurisdiction.
Connecticut officials charge that all targeted companies are bypassing the state's three authorized sports wagering partners - Fanatics locations in cooperation with the Connecticut Lottery Corp., DraftKings at Foxwoods Resort and Casino, and FanDuel at Mohegan Sun. As reported by CT Insider, state officials also claim the companies may be violating underage betting laws by offering sports event contracts to residents without proper licensing. DCP Commissioner Bryan Cafferelli stated that sports betting may only be offered by legal, licensed sportsbooks that adhere to state regulations and technical standards. The enforcement action represents a broader state effort to protect its regulated sports betting market from unauthorized competition.
The Connecticut case adds to an expanding legal dispute over sports prediction markets, with more than a dozen states now taking enforcement action or filing lawsuits against prediction market platforms over sports event contracts. Arizona officials are currently enjoined against pursuing civil and criminal actions against Kalshi and other prediction market exchange operators, but Director Jackie Johnson has asked the Ninth Circuit Court of Appeals to vacate that injunction based on a recent decision in Kalshi v. Assad. That panel issued an opinion that sports event contract trading on the platform are legally tantamount to sports wagering, giving Nevada authorities rights to enforce gambling laws against Kalshi. Coinbase and Crypto.com have both appealed the Ninth Circuit panel's opinion to the US Supreme Court, while Kalshi has asked the Ninth Circuit for a rehearing with the full court. The legal fights have produced conflicting appellate decisions, with the Ninth Circuit ruling against Kalshi in August while the Third Circuit provided preliminary protection for Kalshi in its dispute with New Jersey.
The legal challenges unfold during a period of significant growth in the prediction market sector, with prediction markets generating a record $50.59 billion in combined monthly trading volume in July across Kalshi, Polymarket and Polymarket US, where Kalshi accounted for $37.7 billion of that total. Underdog remains financially significant despite being smaller than Kalshi and Polymarket, as it was acquired by UK-based IG Group for up to $1.3 billion in July, following its $70 million Series C funding round in March 2025 when it was valued at $1.23 billion. The acquisition demonstrates continued investor confidence in the prediction market sector despite regulatory uncertainties across multiple states.
