Prediction market operators form trade coalition to defend federal oversight

• Kalshi and Crypto.com establish Coalition for Prediction Markets with Coinbase, Robinhood and Underdog.
• Group aims to preserve CFTC regulatory authority against state-level enforcement actions.
• Polymarket notably absent from founding members despite shared regulatory interests.

Kalshi and Crypto.com announced the formation of the Coalition for Prediction Markets on 10 December, establishing a unified trade body to defend federal regulatory oversight of event-based contracts.

The coalition includes Coinbase, Robinhood and Underdog, with additional prediction markets companies reportedly in discussions to join.

The Washington DC-based organisation launches as prediction market operators face mounting legal challenges from state gaming regulators. At least 10 states have issued cease-and-desist orders or filed complaints arguing that prediction markets constitute unlicensed gambling operations.

Kalshi CEO Tarek Mansour announced the coalition on social media, framing it as a response to established lobbying interests opposing the sector. He stated prediction markets generate annualised trading volumes exceeding $150 billion and are increasingly used by economists, journalists and policymakers.

According to the Coalition’s new website, the five active members are Kalshi, Crypto.com, Coinbase, Robinhood, and Underdog.

Federal framework under threat

The coalition’s primary objective centres on reinforcing the Commodity Futures Trading Commission’s authority over prediction markets. Sara Slane, executive board member of the coalition and head of corporate development at Kalshi, emphasised the need for regulatory consistency.

“Americans deserve clarity, not 50 conflicting interpretations,” Slane stated.

“As the first federally regulated prediction market, Kalshi saw firsthand how quickly this space was growing – and how urgently a unified industry voice was needed to advocate for access and consistency nationwide,” said Sara Slane, Executive Board Member of the Coalition and Head of Corporate Development at Kalshi

Slane also mentioned the need to create ‘federal safeguards that prevent insider trading’.

The dispute represents a jurisdictional conflict between federal commodities regulation and state gambling oversight. Prediction market operators argue their platforms offer derivatives contracts regulated under the Commodity Exchange Act, not wagering products subject to state gaming commissions.

State regulators counter that betting on basketball games appears identical whether executed through Kalshi or a traditional sportsbook.

Connecticut issued cease-and-desist orders against Kalshi, Robinhood Derivatives and Crypto.com in early December, prompting Kalshi to file a lawsuit asserting federal preemption.

Coalition leadership and priorities

Matt David, executive board member of the coalition and President of North America at Crypto.com, characterised prediction markets as critical infrastructure.

“The U.S. is the biggest frontier for prediction markets, and the momentum we’re seeing makes a unified industry voice not just important, but necessary,” David said in the press release announcing the Coalition.

The coalition will focus on three primary areas: establishing nationwide integrity standards to prevent insider trading, defending against state-level regulatory overreach, and educating stakeholders on prediction markets’ role in aggregating information.

The group says that nearly half of Americans under 45 have accessed online prediction markets.

Faryar Shizad, chief policy officer at Coinbase, framed participation in terms of broader financial access.

“At Coinbase, our mission is to deliver financial freedom to the world – and prediction markets by nature democratize fact finding and the seeking of truth,” Shizad stated.

“We’re proud to join the Coalition for Prediction Markets – as they work with policymakers to ensure these markets develop and remain accessible to the American people.”

Notable absences from founding members

Polymarket, Kalshi’s most direct competitor globally, did not join the coalition despite sharing regulatory interests. The platform recently acquired QCEX, a CFTC-licensed derivatives exchange, for $112 million to facilitate its return to US operations after a multiyear hiatus following a 2022 settlement with the CFTC.

Polymarket began a limited US rollout in late November through a waitlist system, initially offering sports event contracts. The platform processed more than $3 billion in trades on the 2024 presidential election while operating offshore, demonstrating substantial market presence.

Gemini also remains outside the coalition despite receiving CFTC approval for a Designated Contract Market licence on 10 December. The exchange applied for the licence in March 2020 and plans to launch Gemini Titan, its prediction market platform, for US customers.

Traditional sports betting operators have not joined yet. DraftKings secured federal approvals ahead of its predictions product launch. Fanatics already launched Fanatics Markets in 24 US states, while Fan Duel is planning a move into the space as well.

State enforcement actions intensify

Legal challenges have proliferated across multiple jurisdictions. Nevada regulators initially granted Kalshi a preliminary injunction against state enforcement but later reversed the decision.

Massachusetts Attorney General Andrea Joy Campbell filed suit against Kalshi for allegedly operating an illegal sportsbook. The company now faces six separate lawsuits across six states.

California Attorney General Rob Bonta is reportedly preparing to join the fight, planning to support Maryland’s case against Kalshi and considering filing the state’s own lawsuit. The coordination among state attorneys general suggests a multi-jurisdictional strategy to challenge prediction markets’ federal regulatory status.

The American Gaming Association, whose members include casino operators like MGM and Caesars, has launched an advertising campaign attacking prediction markets as unlawful sports betting. The trade group’s opposition intensified after FanDuel, DraftKings and Fanatics departed to pursue prediction market offerings.

Market growth drives regulatory scrutiny

The prediction markets sector recorded unprecedented expansion in 2024.

Reuters reported that combined trading volumes reached approximately $28 billion through October. Kalshi’s valuation surged from $2 billion in June to over $11 billion following its most recent funding round totalling $1 billion.

Industry advocates argue prediction markets provide more accurate forecasting than traditional polling. Coalition materials claim prediction markets outperformed polls by roughly 30% during recent election cycles.

The platforms gained mainstream attention when major news organisations including CNN and CNBC partnered with Kalshi to integrate prediction market data into coverage.

CFTC regulatory posture

The CFTC has not issued comprehensive policy guidance on prediction markets but has signalled conditional acceptance within existing frameworks.

On 12 December, the regulator confirmed a no-action position regarding swap data reporting and recordkeeping requirements for products offered by Polymarket, Gemini and LedgerX.

The no-action letters indicate the agency will not pursue enforcement action against compliant platforms, providing regulatory clarity for operators meeting specified requirements. The letters allow companies to clear contracts through third-party clearing members rather than maintaining proprietary clearing infrastructure.

Under Acting Chair Caroline Pham, the CFTC has adopted a more permissive stance toward prediction markets compared to previous leadership. Pham established a CEO Innovation Council that includes executives from Polymarket, Kalshi, Nasdaq and CME Group, signalling institutional engagement with the sector.

Structural differences from gambling

Coalition members emphasise operational distinctions between prediction markets and traditional sportsbooks.

Kalshi CEO Tarek Mansour told Axios earlier this year:

“I just don’t really know what this has to do with gambling. If we are gambling, then I think you’re basically calling the entire financial market gambling.”

Prediction market operators argue users trade contracts peer-to-peer rather than wagering against a house. Platforms earn revenue from transaction fees similar to brokerages, not from customer losses. Event outcomes are determined by predetermined settlement sources rather than bookmaker calculations.

The legal distinction matters because Commodity Exchange Act regulation allows prediction markets to operate across all 50 states under federal oversight. Traditional sports betting remains restricted to 38 jurisdictions with state-level licensing requirements and taxation frameworks.

Industry consolidation continues

Millions of Americans now engage with prediction markets either as traders or observers, according to coalition materials.

The formation demonstrates how rapidly the sector is maturing. Companies that competed independently now recognise the necessity of collective advocacy to preserve market access. The coalition’s establishment parallels similar trade associations in traditional financial services that defend members’ regulatory interests.

However, the absence of Polymarket and potential future members like FanDuel and DraftKings highlights ongoing fragmentation. Whether the coalition can maintain unity as competitive pressures intensify remains uncertain. The group stated additional companies are in discussions to join.

The coalition faces a challenging regulatory environment. State gaming authorities show little indication of retreating from enforcement actions. Legal battles will likely escalate through federal courts, potentially reaching the Supreme Court for final resolution on federal preemption questions.

The coalition’s effectiveness will depend on its ability to present unified positions while individual member companies navigate separate legal challenges across multiple jurisdictions.