A financial reform advocacy group is urging courts to keep oversight of gambling-style online markets at the state level, arguing that a federal commodities regulator lacks both the authority and capacity to manage them.
Better Markets made its case in an amicus brief supporting Massachusetts in a growing legal dispute over prediction markets, platforms where users trade contracts based on real-world outcomes.
Prediction markets framed as gambling
According to Better Markets, these platforms operate more like gambling than traditional financial instruments and should therefore fall under state jurisdiction rather than the Commodity Futures Trading Commission (CFTC).
Dennis Kelleher, Co-founder, President, and CEO of Better Markets, sharply criticized the federal agency’s involvement, pointing to alleged misconduct on some platforms. Kelleher cited rising reports of insider trading and other abuses on platforms such as Kalshi, arguing that the CFTC is not equipped to effectively police such activity.
He described the agency as under-resourced and ill-suited to regulate what he characterized as “unregulated online casinos” attempting to bypass state gambling laws.
Massachusetts intensifies legal action
The debate comes as Massachusetts escalates its scrutiny of prediction market operators. State regulators have already secured an injunction limiting aspects of Kalshi’s operations and imposed a 30-day deadline for the company to implement geofencing to block in-state users.
Meanwhile, the Massachusetts Gaming Commission has warned that certain event-based contracts may violate state gambling laws, prompting further legal challenges, including a lawsuit from Polymarket seeking to block those restrictions.
Broader legal battle expands nationwide
The Massachusetts case is part of a wider national clash between state regulators and federal authorities. The CFTC has filed lawsuits and legal actions across multiple states to defend its claim of exclusive jurisdiction over prediction markets, setting up a conflict that could reshape how these platforms are regulated in the U.S.
Legal experts increasingly believe the issue could escalate to the highest level, with the Supreme Court potentially stepping in to resolve whether prediction markets fall under financial regulation or gambling law.
Better Markets argues that Congress never intended for the CFTC to oversee gambling or act as a nationwide authority on event-based betting markets. The group also raised broader concerns about lightly regulated prediction markets, including risks of corruption, insider trading, and increased problem gambling.
At the center of the dispute are platforms like Kalshi, which operate under federal commodities law but face mounting resistance from state officials who view them as unlicensed gambling operators.
Courts to decide future of prediction markets
Better Markets maintains that states are better positioned to regulate gambling within their borders and is calling on the CFTC to refocus on its core mission of overseeing derivatives markets. The case highlights a widening national debate over whether prediction markets should be treated as financial instruments or traditional gambling, an issue now increasingly being decided in the courts.
