US prediction markets head into the end of 2026 bigger, richer and more legally exposed than at any point in their short history. Kalshi is trading tens of billions of dollars a month, the two largest sportsbook groups have launched their own exchanges, and three federal appeals courts have split on whether states can touch any of it. Our read is that 2027 is the year that question finally gets a national answer, though probably not until the summer.
In this article 10 sections
- The Supreme Court case that could settle sports event contracts
- A circuit split that is now hard to ignore
- State courts are already setting the rules on the ground
- CFTC rulemaking under Mike Selig: the federal counterweight
- Kalshi and Polymarket volumes and valuations
- Sportsbook prediction apps are hedging the outcome
- Midterm election markets and the politics of event contracts
- Federal legislation: noise until the Court speaks
- What to expect in 2027
- Further reading on American.Bet
The Supreme Court case that could settle sports event contracts
The case to watch is Flaherty v. KalshiEX, No. 26-299. New Jersey’s gaming regulators filed their petition for certiorari on September 2, 2026, asking the justices to review the Third Circuit’s April 6 ruling for Kalshi. According to the Supreme Court docket, Kalshi’s response was originally due October 8 and is now due November 9, 2026, after the Clerk granted an extension.
What strikes us most on that docket is the queue of friends of the court. Eleven amicus briefs had landed by October 8, from the American Gaming Association, the National Football League, the Casino Association of New Jersey, 145 tribes and tribal organizations, former CFTC chairman Gary Gensler, former Senator Christopher Dodd, international gaming regulators and a coalition led by Ohio with 38 other states and the District of Columbia.
The timing points to a decision in 2027. If Kalshi files on November 9 and New Jersey replies, the petition could reach a conference in December or January. A grant at that point would put argument in the spring and an opinion before the term ends in late June or early July. A later grant would push the case into the October 2027 term. Either way, we expect the justices to take it.
A circuit split that is now hard to ignore
The reason we are confident about a grant is the split. A divided Third Circuit panel held in April that Kalshi’s event contracts are swaps and that federal law preempts New Jersey’s gambling rules, with Judge Roth dissenting on the grounds that the products closely resemble sportsbook bets. Then the map flipped. As Gaming.net’s summary of the litigation records, a unanimous Ninth Circuit panel ruled against Kalshi on August 28, 2026, finding that sports wagers are not swaps, and a unanimous Sixth Circuit panel reached the same result on September 25, rejecting express, field and conflict preemption. Kalshi asked the Ninth Circuit for en banc review on September 9.
Maryland’s case in the Fourth Circuit, argued on May 7, is still pending. New Jersey’s petition counts more than 20 rulings on the issue across courts, 18 of them rejecting preemption and four accepting it.
State courts are already setting the rules on the ground
While the federal question waits, state judges have been writing orders with teeth. In Nevada, the First Judicial District Court granted the Nevada Gaming Control Board’s request for a preliminary injunction against Kalshi on April 3, 2026. The Board’s position is blunt: “entities offering these contracts must be licensed in the state of Nevada.”
Michigan went further on enforcement detail. Ingham County Circuit Court Judge Rosemarie Aquilina issued a preliminary injunction at the start of September requiring Kalshi to keep blocking Michigan residents from sports contracts, use a geolocation provider licensed by the state regulator, and pay $500,000 a day for violations, The Block reported. Attorney General Dana Nessel said Kalshi “long attempted to pass itself off as a legitimate gaming operation in our state.” More than a dozen states have now taken action.
We expect this patchwork to widen in early 2027. For bettors in licensed states, the practical effect is that regulated sportsbooks, such as those covered on our Michigan sportsbooks page, remain the clear legal route for sports wagers.
CFTC rulemaking under Mike Selig: the federal counterweight
Washington has been pulling the other way. On June 10, 2026, the CFTC proposed a framework for reviewing event contracts that involve enumerated activities such as gaming, terrorism and war, with a 90-day review process, contract-by-contract public interest factors and new definitions of “involve” and “gaming.” Chairman Michael Selig said the agency “will protect the integrity of our regulated markets without standing in the way of responsible innovation.”
Axios reported that the 267-page proposal would permit contracts on final scores, point spreads, tournament advancement and player statistics, while barring single plays, injuries, officiating decisions and high school games. Selig is the commission’s only sitting member, which means a final rule could move quickly. Our forecast is that the CFTC finalizes a version of this rule in the first half of 2027, timed to give the Supreme Court a fully formed federal regime to weigh.
Kalshi and Polymarket volumes and valuations
The money tells its own story. The Block reported Kalshi traded $38.67 billion in August 2026, against $8.41 billion for Polymarket and Polymarket US combined. Kalshi raised a $1 billion Series F at a $22 billion valuation in May and was reported to be in talks at $40 billion, with a Form D showing about $1.12 billion in equity sold since April. Polymarket was last reported in talks at $15 billion. Kalshi chief executive Tarek Mansour has said an IPO is under consideration but will not happen this year.
Our read: a 2027 listing for Kalshi depends almost entirely on the Supreme Court. Our Kalshi review tracks the product as it stands today.
Sportsbook prediction apps are hedging the outcome
DraftKings and FanDuel are no longer waiting for a verdict. FanDuel Predicts launched with CME Group on December 22, 2025, in Alabama, Alaska, North Dakota, South Carolina and South Dakota, all states without legal online sports betting. DraftKings Predictions launched the same month. In its second-quarter 2026 results, DraftKings said Predictions “is already growing faster than we anticipated,” while Sports Consumer Volume, which now includes prediction trades, rose 14.5% to $13.1 billion.
That is a two-way bet. If the Court sides with the states, these apps shrink back to states without sportsbooks. If it sides with Kalshi, the incumbents already have the products, licenses and customer lists. Compare the two on our DraftKings Predictions page.
Midterm election markets and the politics of event contracts
The November 3 midterms are the first big federal election since political contracts went mainstream on regulated exchanges. DeFi Rate counted $103.87 million in midterm election volume across Kalshi, Polymarket US, ForecastEx and Gemini between October 1 and 20, up 153% on the same stretch of September, with Kalshi taking about 76%. The Texas Senate race and House control drove nearly half of it.
That is small beside sports volume. Election markets give operators a public-interest argument; sports contracts pay the bills.
Federal legislation: noise until the Court speaks
Congress has bills but no momentum. Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act on March 23, 2026, which would bar CFTC-registered platforms from listing sports and casino-style contracts. Schiff said it was “time for Congress to step in and eliminate this backdoor.” We have seen no committee action. Our view is that Congress moves only after the Supreme Court rules, and only if the losing side lobbies for a fix.
What to expect in 2027
- The Supreme Court likely grants review in Flaherty v. KalshiEX, given the 2-1 circuit split and 11 amicus briefs filed by October 8.
- A merits decision could land by summer 2027 if cert is granted in December or January, with argument in the spring.
- The CFTC finalizes its event contract rule in the first half of the year, with a sole commissioner able to act quickly, and states sue over it.
- More state injunctions follow the Nevada and Michigan model, including geolocation mandates and daily fines.
- Kalshi holds off on an IPO until the Court rules, despite talks at a $40 billion valuation.
- DraftKings and FanDuel expand their prediction apps into further non-sportsbook states while protecting their licensed books.
- Federal legislation stalls in committee unless the ruling forces Congress to act.
Prediction markets and sports betting are for adults only, 21+ where gambling applies. If gambling stops being fun, call 1-800-GAMBLER or visit GambleAware.org for free, confidential support.
Further reading on American.Bet
- New Sports Betting States in 2027: Who Could Legalize and Who Won’t
- Tribal Gaming in 2027: Online Betting, Courts and the Seminole Model
- Prediction market apps compared
- Polymarket review
Will the Supreme Court hear the Kalshi New Jersey case in 2027?
New Jersey’s petition, No. 26-299, has a response due November 9, 2026. With the Third Circuit split from the Sixth and Ninth Circuits, we expect a grant and a ruling during 2027.
Is Kalshi legal in Nevada and Michigan right now?
Courts in both states have issued preliminary injunctions blocking Kalshi’s sports contracts. Michigan’s order carries a $500,000 daily fine for violations.
What would the CFTC sports event contract rule allow?
The June 2026 proposal would permit contracts on final scores, spreads, advancement and player stats, but bar single plays, injuries, officiating and high school games.