Donald Trump Jr. urged Republican state attorneys general not to target prediction markets, placing the Kalshi and Polymarket prediction platforms at the center of a prominent issue over whether prediction markets like Kalshi and Polymarket should be treated as federally regulated financial exchanges or as state gambling operations.
Speaking at the Republican Attorneys General Association’s conference in New Orleans in March, The New York Times reported that Trump Jr. was concerned that gambling companies would lobby states to protect their existing “monopolies” and wished that prediction markets were federally regulated and not regulated by individual states.
His involvement prompted scrutiny because Trump Jr was already an adviser to Kalshi and 1789 Capital, a venture capital firm that invested in Polymarket, and has served on their advisory board. Kalshi has said that his advisory role is only for the firm’s marketing strategy, not regulatory matters.
The political dispute has led to enforcement actions by state governments. In March, Arizona Attorney General Kris Mayes filed 20 counts against Kalshi, alleging that the company was operating an unlicensed gambling business by selling contracts betting on elections, including the Arizona governor elections of 2026 and the 2028 United States presidential election.
Other states have taken similar measures. A Massachusetts court in January issued an injunction preventing Kalshi from selling contracts tied to sports events in Massachusetts unless it complies with Massachusetts sports-betting licensing requirements.
New York sued Kalshi in July, alleging its prediction markets constituted illegal unlicensed wagering. New York officials also questioned whether markets could be traded by customers aged 18 through 20, since sports bettors in New York are required to be over age 21. Kentucky also targets Kalshi, Polymarket, and other operators who offer sports-related event contracts.
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The authority of the Commodity Futures Trading Commission, which has consistently maintained that federally registered trading exchanges for wagering contracts on future events fall under its purview and challenged attempts by states to regulate such exchanges as gambling enterprises, has been central to the controversy.
States disagree. In July, a coalition of 44 attorneys general told the CFTC that federal commodities law does not give the agency authority to effectively assume control over sports wagering by regulating prediction markets.
If it is successful, the federal government’s performance could determine prediction market policy in the U.S., potentially establishing a national market for event contracts. If states exercise jurisdiction over these markets, the operators may be forced to navigate the state’s differing licensing, minimum age, and gambling laws in their markets.
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So the jurisdictional issue is no longer a theoretical disagreement among regulators. States are filing suit, the CFTC is defending against that suit, and courts are forced to sort out differences between financial event contracts and legitimate regulated gambling. The decisions could define the business model of Kalshi, Polymarket, and other prediction markets seeking to operate freely across the country.
