Last updated: April 2026
CFTC Enforcement & Prediction Markets
The CFTC has ended its regulatory silence on prediction markets. Here's what the 2026 advisories, insider trading enforcement actions, state legal battles, and the 2024 federal court ruling mean for traders.
CFTC Prediction Markets Advisory (2026)
The CFTC issued two major regulatory documents in early 2026, signaling a new era of active oversight after years of relative inaction.
Enforcement Division Advisory — February 25, 2026
SourceThe CFTC's Division of Enforcement issued Release 9185-26, using the Kalshi insider trading disclosures to assert it retains primary enforcement jurisdiction over all CFTC-registered designated contract markets (DCMs) — including KalshiEX and other designated contract markets. The advisory made clear: existing CEA prohibitions on insider trading, fraud, and manipulation apply in full to prediction market contracts.
DMO Staff Advisory + Rulemaking — March 12, 2026
SourceThe most significant regulatory action yet. The Division of Market Oversight issued a staff advisory (Release 9193-26) reminding DCMs of obligations under Core Principle 3: list only contracts "not readily susceptible to manipulation." The advisory specifically flagged sports contracts tied to individual injuries, officiating decisions, or single-player actions as high-risk.
Simultaneously, under Chairman Michael S. Selig (Mike Selig), the Commission released an Advance Notice of Proposed Rulemaking (Release 9194-26), opening a 45-day public comment period on how to regulate event contracts — the first formal rulemaking process for this market sector. A final rule is expected within one to two years.
Selig announced the rulemaking at the FIA Global Cleared Markets Conference:
"This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets."
— Chairman Michael S. Selig (Mike Selig), FIA Global Cleared Markets Conference, March 9, 2026
Baker McKenzie's February 27, 2026 "Eye on Enforcement" analysis — published two days after the CFTC's first advisory — identified key risk areas: insider trading (misappropriation of confidential information in breach of a duty of trust or confidence under CEA §6(c)(1) and CFTC Reg. 180.1); pre-arranged trades and wash sales; disruptive trading practices including spoofing (CEA §4c(a)(5)); and traditional fraud and manipulation.
The firm noted the CFTC is unlikely to pursue enforcement for smaller retail trading — that will remain a DCM self-enforcement function with CFTC follow-on actions. For large-scale, coordinated, or sophisticated conduct, expect direct CFTC involvement. Read the full analysis
CFTC-Identified Enforcement Risk Areas
Misappropriation of confidential or nonpublic information in breach of a duty of trust or confidence.
CEA §6(c)(1); CFTC Reg. 180.1
Prohibited trade structuring to negate market risk or create false volume.
CEA §4c(a)(1), (2)(A); CFTC Reg. 1.38
Conduct that disrupts fair and orderly markets, including spoofing.
CEA §4c(a)(5)
Prohibits trading while in possession of material, non-public information obtained from a federal government source. Codified in Dodd-Frank (2010). First used on a prediction-market trade in the Van Dyke / Maduro complaint (Apr 23, 2026) — see /polymarket-maduro-insider-trading-case.
CEA §4c(a)(4)
Traditional CEA anti-fraud and anti-manipulation provisions apply in full.
CEA §9(a)(2); CFTC Reg. 180.2
Insider Trading Cases: Kalshi Enforcement Actions
On February 25, 2026, Kalshi became the first prediction market to publicly disclose insider trading enforcement actions — modeled on how CME Group and other established derivatives exchanges publish enforcement notices. Understanding how prediction markets work is essential context for why these enforcement actions matter. Both cases were independently verified and reported to the CFTC.
Case 1: California Gubernatorial Candidate (Kyle Langford)
Feb 25, 2026Kalshi's surveillance flagged a video Langford posted online "that appeared to show him trading on his own candidacy." He has since dropped out of the governor's race and announced a congressional run. (Source: WIRED, Axios — Feb 25, 2026)
Case 2: MrBeast Editor (Artem Kaptur)
Feb 25, 2026Kaptur's "near-perfect trading success on markets with low odds" triggered Kalshi's surveillance. Investigation confirmed he had advance knowledge of MrBeast video content through his editorial role. Account was frozen before he could withdraw any profits. (Sources: NYT, NPR, CFTC Release 9185-26 — Feb 25, 2026)
Note: This is the same case referenced in our platform database as "Artem Kaptur (MrBeast VFX editor) fined $20,397.58 by Kalshi" (Feb 25, 2026).
Venezuela/Maduro Controversy (Polymarket — Separate Case)
In early January 2026, a Polymarket account created just days prior bet approximately $32,000 that Venezuelan President Nicolás Maduro would be removed from office by January 31. Hours later, U.S. forces captured Maduro following military strikes on Caracas. The account netted over $400,000 profit — a return exceeding 1,200% in less than 24 hours.
The timing sparked immediate scrutiny. Critics noted the account made only four predictions, all Venezuela-related. The Wall Street Journal published a timeline of the trades. Gambling consultant Dustin Gouker told Axios: "It just defies belief that this wasn't insider information." A separate trader claimed on X to have made $80,000 by noticing increased Domino's Pizza orders near the Pentagon — a well-known proxy for military activity.
The trades occurred on the global Polymarket platform. Polymarket's U.S. platform (QCX LLC) launched November 25, 2025, prior to the January 2026 Maduro trades; however, the MNPI investigation concerns the offshore global platform, not the U.S. venue. Kalshi confirmed the activity did not occur on its platform and that its rules already prohibit trading on material non-public information.
The controversy directly triggered the Torres legislation (see next section).
Torres Legislation: Public Integrity Act
Public Integrity in Financial Prediction Markets Act of 2026
H.R. 7004
What the bill prohibits:
- Federal elected officials from trading on prediction market contracts
- Political appointees and executive branch employees from trading
- Congressional staff from trading
Specifically on contracts tied to government policy, government action, or political outcomes — when they possess or could reasonably obtain material nonpublic information through their official duties.
"The most corrupt corner of Washington, D.C. may well be the intersection of prediction markets and the federal government — where insider trading and self-dealing are no longer imagined risks but demonstrated dangers."
— Rep. Ritchie Torres, January 9, 2026
Related Legislation (2026)
End Prediction Market Corruption Act
IntroducedSens. Jeff Merkley (D-OR) and Amy Klobuchar (D-MN) — March 5, 2026
Would ban the president, vice president, and members of Congress from trading event contracts on prediction markets entirely.
DEATH BETS Act
IntroducedSen. Adam Schiff (D-CA) and Rep. Mike Levin (CA-49) — March 10, 2026
Would amend the Commodity Exchange Act to ban CFTC-registered exchanges from listing contracts tied to terrorism, assassination, war, or individual death.
CFTC Chair Michael S. Selig (Mike Selig): The Federal Preemption Position
"The CFTC will no longer sit idly by while overzealous state governments undermine the agency's exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products."
— Chairman Michael S. Selig (Mike Selig), Wall Street Journal op-ed, February 16, 2026
Published simultaneously on cftc.gov
Selig announced the op-ed alongside the CFTC filing an amicus brief in the Ninth U.S. Circuit Court of Appeals in support of Crypto.com in its battle against Nevada state regulators — the first time under Selig that the CFTC took sides in a state vs. federal jurisdiction dispute. He also posted a video warning to state attorneys general: "To those who seek to challenge our authority in this space, let me be clear: we will see you in court."
Selig also addressed the rulemaking directly at the FIA Global Cleared Markets Conference (March 9, 2026):
"Make no mistake — the CFTC is no longer going to sit idly while these markets develop within our framework. The reality is that prediction market platforms are now viewed by the public as more accurate than political polls."
— Chairman Michael S. Selig (Mike Selig), FIA Global Cleared Markets Conference, March 9, 2026 (cftc.gov)
2024 D.C. Federal Court Ruling
KalshiEX LLC v. CFTC
Civil Action No. 23-3257 (D.D.C.) | Appellate: No. 24-5205 (D.C. Cir.)
June 2023
Kalshi self-certifies congressional control contracts with CFTC.
September 22, 2023
CFTC (3-1-1: three joined, Mersinger dissented, Pham abstained) prohibits Kalshi's political event contracts, calling them "gaming" contrary to public interest.
September 6, 2024
U.S. District Judge Jia M. Cobb (D.D.C.) grants summary judgment for Kalshi: CFTC exceeded authority. "Kalshi's contracts do not involve unlawful activity or gaming. They involve elections, which are neither."
October 2, 2024
D.C. Circuit (No. 24-5205) denies CFTC's emergency stay request, dissolving the administrative stay. Trading proceeds before the November election.
May 2025
CFTC voluntarily dismisses its appeal (May 7, 2025). Kalshi's election markets remain live.
State-by-State Legal Challenges
20+ federal and state actions pending as of April 2026. Mixed outcomes: NJ 3rd Circuit ruled for Kalshi (Apr 6); CFTC won Federal TRO in AZ (Apr 10, PR 9211-26); OH OCCC $5M fine notice (Apr 14); KY HB 904 enacted via veto override (Apr 14); WA AG civil suit pending (Mar 27). states have filed lawsuits challenging CFTC authority over prediction markets. More than 30 states and D.C. filed amicus briefs supporting state regulatory authority. Platforms continue operating in all litigation states while appeals proceed.
TRO GRANTED March 20, 2026 — Kalshi blocked in NV; PI hearing April 3
Federal judge remanded to state court (March 3, 2026). 9th Circuit denied stay March 19. First Judicial District Court Judge Jason Woodbury granted NGCB's TRO March 20, 2026 — prohibiting sports, election, and entertainment event contracts. 14-day order; PI hearing April 3, 2026. Source: gaming.nv.gov press release; Yahoo Finance/InGame March 20, 2026.
Third Circuit ruled 2-1 for Kalshi (April 6, 2026) — platforms fully operational; NJ may seek en banc or SCOTUS review
New Jersey Division of Gaming Enforcement filed suit challenging Kalshi event contracts under state gambling law. The Third Circuit Court of Appeals ruled 2-1 on April 6, 2026 (KalshiEX LLC v. Flaherty) that the CFTC has exclusive jurisdiction over Kalshi sports-related event contracts, upholding Kalshi preliminary injunction. First federal appeals court ruling affirming CFTC preemption. NJ may still seek en banc rehearing or Supreme Court review. Platforms fully operational.
AG lawsuit filed — platforms operational
Maryland Attorney General filed suit challenging prediction market contracts. Platforms continue operating while case proceeds.
AG lawsuit filed — platforms operational
Massachusetts Attorney General filed suit challenging prediction market contracts under state gambling law. Platforms continue operating.
AG sued Kalshi March 4, 2026 — Polymarket counter-sued same day
AG Dana Nessel sued Kalshi under Michigan Gaming Control Act. Polymarket preemptively counter-sued in Western District of Michigan federal court the same day.
Federal court denied Kalshi injunction (March 9, 2026); OCCC issued $5M notice of intent to fine (April 14, 2026) — sports contracts subject to Ohio law
U.S. District Judge Sarah D. Morrison (S.D. Ohio, Eastern Division) denied Kalshi's motion for preliminary injunction on March 9, 2026. Court ruled sports event contracts are not 'swaps' under CEA and federal law does not preempt Ohio gaming law. On April 14, 2026, the Ohio Casino Control Commission issued a $5M notice of intent to fine Kalshi, citing unlicensed sports-betting operation, age verification violations, missing 20% gaming tax, and non–Time-Out-Ohio self-exclusion. Kalshi remains operational while contesting; Sixth Circuit appeal pending. Political and economic markets unaffected.
AG lawsuit filed — platforms operational
Connecticut Attorney General filed suit challenging prediction market contracts. Platforms continue operating while case proceeds.
Kalshi won preliminary injunction (Feb 19, 2026) — sports contracts continue
Tennessee Sports Wagering Council issued cease-and-desist; Kalshi sued Tennessee officials. U.S. District Judge Aleta A. Trauger (M.D. Tenn.) granted Kalshi preliminary injunction on Feb 19, 2026, ruling sports event contracts are likely swaps under federal law and CEA preempts state gaming law. Kalshi posted $500K bond.
AG lawsuit filed — platforms operational
New York Attorney General filed suit challenging prediction market contracts. Platforms continue operating while case proceeds.
AG lawsuit filed — platforms operational
Utah Attorney General filed suit challenging prediction market contracts under state gambling law. Platforms continue operating.
CFTC TRO GRANTED April 10, 2026 — criminal arraignment paused; first-ever criminal PM charges (March 17)
Arizona AG Kris Mayes filed 20 misdemeanor criminal charges (16 unlicensed gambling + 4 election wagering) March 17, 2026. Arizona first state to file criminal charges against a prediction market. Kalshi had preemptively sued AZ March 12. Federal judge denied Kalshi-filed TRO. CFTC + DOJ filed suit against AZ, CT, IL seeking preemption declaratory judgment (April 2/9). CFTC filed TRO motion April 9. U.S. District Judge Michael Liburdi granted CFTC TRO April 10 — bars AZ from enforcing gambling laws in criminal or civil actions against CFTC-regulated DCMs. Monday April 13 arraignment called off. AZ AG evaluating next steps. Sources: CFTC PR 9211-26, CFTC PR 9208-26, azag.gov (March 17), AP (April 10/11, 2026).
WA AG civil suit filed March 27, 2026 — seeks to shut down Kalshi operations in WA
Washington AG Nick Brown filed civil lawsuit in King County Superior Court on March 27, 2026. Seeks injunction, restitution, and civil penalties. Alleges Kalshi violates WA gambling and consumer protection laws. Source: GeekWire (March 28, 2026); casinobeats (March 30, 2026).
States with Platform-Level Restrictions
WA, LA, MT, and SD have platform-level restrictions; some platforms restrict users from these states under state gambling statutes. Check each platform's terms of service for current eligibility.
Federal Preemption: Where Things Stand
- Third Circuit (April 6, 2026): Ruled 2-1 that CFTC has exclusive jurisdiction over Kalshi's sports-related event contracts. First federal appeals court to affirm CFTC preemption of state gaming law.
- Nevada (March 3, 2026): Federal judge remanded Kalshi & Polymarket cases to state court, denying CFTC preemption. Emergency appeals pending at 9th Circuit. May create circuit split with Third Circuit's April 6 ruling.
- CFTC filed amicus brief (Feb 17, 2026) in 9th Circuit supporting Crypto.com, asserting exclusive federal jurisdiction.
- Ohio (March 9, 2026): U.S. District Judge Sarah Morrison (S.D. Ohio) denied Kalshi's preliminary injunction, ruling sports event contracts are not "swaps" under the CEA and federal law does not preempt Ohio gaming law. Political and economic markets unaffected. Kalshi appealing to Sixth Circuit.
- Arizona (March 17, 2026): First-ever criminal charges against a prediction market — Arizona AG Kris Mayes filed 20-count misdemeanor complaint in Maricopa County Superior Court. CFTC Chair Selig called it "entirely inappropriate." Update: Federal TRO (CFTC PR 9211-26, April 10, 2026) paused state criminal enforcement while federal preemption is litigated.
- Nevada (March 20–21, 2026): Judge Jason D. Woodbury granted Nevada Gaming Control Board's request for a temporary restraining order against Kalshi — temporarily banning it from operating in Nevada. Kalshi appealing on CFTC preemption grounds.
- Washington (March 27, 2026): Washington AG filed a civil suit against Kalshi challenging its operations in the state. Case pending.
- Kentucky (April 14, 2026): Legislature overrode the governor's veto of HB 904, legalizing prediction market trading under state law.
- The CFTC vs. states dispute may ultimately reach the Supreme Court.
What Traders Should Know
Your money is protected
CFTC-regulated exchanges (Kalshi, Polymarket) are required to hold customer funds in segregated accounts. Your deposits are protected regardless of state-level legal challenges.
Insider trading rules are real
Kalshi has demonstrated it will find you, freeze your account, fine you, and report you to the CFTC. If you have material non-public information about a market — do not trade.
Platforms are still operating
Litigation in 20+ federal and state actions pending as of April 2026. Mixed outcomes: NJ 3rd Circuit ruled for Kalshi (Apr 6); CFTC won Federal TRO in AZ (Apr 10, PR 9211-26); OH OCCC $5M fine notice (Apr 14); KY HB 904 enacted via veto override (Apr 14); WA AG civil suit pending (Mar 27). states is ongoing, but all CFTC-regulated platforms continue to operate in those states while appeals proceed. Federal court victories have kept markets open.
Regulatory clarity is coming
The ANPRM (March 12, 2026) opens a formal rulemaking process. A final rule is 1–2 years away. Until then, platforms operate under existing CEA frameworks with the March 2026 advisory as guidance.
Compliance Checklist (Baker McKenzie, Feb 27, 2026)
- Review internal policies on non-public information, communication controls, and employee trading
- Evaluate prediction market activity under existing insider trading, manipulation, and market abuse frameworks
- Create contemporaneous records for the reasons behind trading positions, including citations to public and private research
- Train personnel on the regulatory status of prediction markets and potential enforcement exposure
- Monitor future CFTC and SEC guidance as these markets continue to evolve
Regulatory Timeline
Key events from our verified platform database + verified primary sources.
November 2020
Kalshi receives CFTC Designated Contract Market (DCM) approval.
verified platform data
January 2022
Polymarket settles with CFTC for $1.4M; exits U.S. market.
verified platform data (2022-01)
September 2023
CFTC (3-1-1: three joined, Mersinger dissented, Pham abstained) prohibits Kalshi's congressional control contracts.
KalshiEX LLC v. CFTC, No. 23-3257
September 6, 2024
D.C. District Court (Judge Jia M. Cobb) vacates CFTC's prohibition — Kalshi wins.
KalshiEX LLC v. CFTC, No. 23-3257
October 2, 2024
D.C. Circuit (No. 24-5205) denies CFTC stay. Election trading proceeds.
law.justia.com/cases/federal/appellate-courts/cadc/24-5205/
November 2025
Polymarket QCX LLC amended CFTC order — Polymarket US launches.
verified platform data (2025-11-25)
December 22, 2025
Michael S. Selig (Mike Selig) sworn in as CFTC Chair (confirmed December 18, 2025).
verified platform data (keyPeople)
February 16–17, 2026
Selig publishes WSJ op-ed (Feb 16): "The CFTC will no longer sit idly by..." Files CFTC amicus brief in 9th Circuit (Feb 17) supporting Crypto.com.
cftc.gov/PressRoom/SpeechesTestimony/seligstatement021726
February 25, 2026
Kalshi discloses first public enforcement actions (Langford, Kaptur). CFTC Enforcement Advisory issued (Release 9185-26).
CFTC Release 9185-26; Axios, WIRED, NPR
February 27, 2026
Baker McKenzie publishes 'Eye on Enforcement' analysis of CFTC Prediction Markets Advisory.
bakermckenzie.com
March 3, 2026
Nevada federal judge remands Kalshi & Polymarket cases to state court. Emergency appeals filed to 9th Circuit.
verified platform data (NV litigationDetails)
March 9, 2026
Selig announces rulemaking at FIA Conference: 'Make no mistake — the CFTC is no longer going to sit idly while these markets develop.'
cftc.gov/PressRoom/SpeechesTestimony/opaselig2
March 10, 2026
Ohio federal court (Judge Sarah Morrison, S.D. Ohio) denies Kalshi injunction — sports contracts subject to Ohio law. Political markets unaffected. Kalshi appealing.
verified platform data (OH litigationDetails)
March 12, 2026
CFTC issues DMO Staff Advisory (Release 9193-26) and Advance Notice of Proposed Rulemaking (Release 9194-26). 45-day public comment period opens.
cftc.gov/PressRoom/PressReleases/9193-26
April 23, 2026
DOJ unseals federal indictment and CFTC files parallel civil complaint (PR 9217-26) against U.S. Army soldier Gannon Van Dyke over Polymarket Venezuela / Maduro-out trades. First-ever CFTC insider-trading complaint on an event contract and first-ever use of CEA §4c(a)(4) — the “Eddie Murphy Rule.”
cftc.gov/PressRoom/PressReleases/9217-26; justice.gov/opa