Sports betting has taken many forms over the years, but its most recent iteration is so distinctive that it may not even be considered betting. Kalshi, a prediction market platform that rapidly surged in popularity this summer, allows users to trade contracts based on the outcomes of real-world events, including sporting competitions. Unlike typical sportsbooks such as DraftKings and FanDuel, Kalshi is classified as a derivatives market, federally regulated by the Commodity Futures Trading Commission (CFTC). This difference has created more opportunities for use in states where traditional sports betting is illegal, but as Kalshi’s popularity has grown, so has the debate over its legality.
Founded by MIT graduates Tarek Mansour and Luana Lopes Lara in 2018, Kalshi was built around the idea that people should be able to benefit from and trade on their predictions about everyday events. Instead of investing in a company’s financial performance, Kalshi allows users to capitalize on straightforward yes-or-no questions. To participate, consumers purchase event contracts priced between one cent and 99 cents. Prices fluctuate based on market demand and the overall probability that an event will occur.
During the 2026 FIFA World Cup, Kalshi drew attention from viewers looking to trade on match outcomes, with its exhaustive catalog of event contracts allowing users to bet on every game in the tournament. However, the platform’s market of tradable events extends far beyond sports. Users can buy into anything from Billboard chart rankings and television viewership numbers to the weather.
Kalshi has extended prediction market access to groups historically excluded from sports betting, particularly young adults. Since prediction markets operate under federal regulation, the platform is legally available to anyone over 18, a lower limit than the traditional minimum age of 21 for sports betting in many states. Traders under 21 have wagered an estimated $5.4 billion on Kalshi this year alone.
Legal debate surrounding Kalshi intensified in 2023, when the company sued the CFTC in the U.S. District Court for the District of Columbia in KalshiEX LLC v. CFTC. The conflict arose after the CFTC blocked Kalshi from listing contracts pertaining to congressional election outcomes, arguing that this form of trading could be considered illegal gaming and could harm the public interest. The court ultimately sided with Kalshi, ruling that the CFTC had not demonstrated that tradable election-related contracts would inflict harm.
The legal landscape most recently shifted in September 2026, with several states successfully challenging Kalshi’s legal authority. Federal appeals courts in Nevada, Ohio and Tennessee have ruled against Kalshi, finding that “swaps,” which are the trades made through Kalshi, should be subject to state gambling laws. These recent decisions contrast with an early ruling in April, when the 3rd U.S. Circuit Court of Appeals sided with Kalshi in its legal dispute with New Jersey, accepting the company’s argument that “swaps” are classified as sports contracts and therefore do not violate state gambling laws. New Jersey has since petitioned the U.S. Supreme Court to review Kalshi’s sports markets.
These conflicting rulings have deepened uncertainty over how Kalshi should be regulated and what the future of prediction markets will look like. Kalshi is exploring uncharted territory, and it will be interesting to see how the developments unfold in real time. To resolve the split across courts, this legal battle may ultimately reach the U.S. Supreme Court to settle the debate.