The Feds Are Suing 4 States Over Prediction Markets — Here's Why California Isn't One

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Which states is the federal government suing?

New York, Connecticut, Arizona, and Illinois. The flagship case is United States and CFTC v. New York (Case No. 1:26-cv-3404, S.D.N.Y.), filed April 24, 2026, with parallel cases against the other three states filed in March and April.

Why isn't California on the list?

Because California's Attorney General has not taken enforcement action against prediction markets. Two factors explain this: California's two failed sports-betting ballot measures in 2022 mean there's no in-state industry to protect from out-of-state competition, and prediction markets are politically popular in California — especially in Los Angeles, where Kalshi has hosted in-person events.

What are the federal lawsuits actually arguing?

That the Commodity Exchange Act gives the CFTC exclusive jurisdiction over event-contract platforms, and that state regulators (including state gaming commissions) are preempted from imposing their own rules on Kalshi, Polymarket, and similar Designated Contract Markets.

Are Kalshi and Polymarket still operating in the sued states?

Yes, while the cases are pending. State cease-and-desist orders remain formally in effect but aren't being actively enforced against retail users. There is some geofencing risk if a state wins an emergency injunction.

Could California join the lawsuits later?

It's possible but unlikely under the current state administration. The Bonta AG office has signaled no interest in enforcement, and California's political dynamics around gambling make aggressive action politically costly.

What if the federal government loses these cases?

Unlikely, but if it happened, it would open the door to state-by-state regulation. California would then have to decide affirmatively whether to allow, restrict, or ban prediction markets. The most likely outcome would be continued operation, possibly with notification-only registration.

Should California traders change anything because of this?

No immediate action needed. California's combination of federal CFTC backing plus zero state opposition makes it one of the most stable jurisdictions in the country. Continue operating with normal accounts on Kalshi, Polymarket, and others.

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