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February saw prediction markets reach new trading highs around the Super Bowl while regulators, courts, and lawmakers increased scrutiny of sports-related event contracts. Federal regulators signaled a shift toward clearer oversight, while enforcement actions and legislative proposals emerged across multiple states. At the same time, tribal gaming leaders urged Congress to address what they see as regulatory gaps between prediction markets and traditional sports betting frameworks.
TL;DR: A Bite-sized Overview
- Kalshi reports $1B Super Bowl trading day: The platform recorded over $1 billion in trades on Super Bowl Sunday and $2.8 billion for the week surrounding the game, driven by contracts tied to the matchup and entertainment events.
- CFTC signals new prediction market rules: The agency withdrew earlier proposals restricting sports and political contracts and said it will pursue clearer federal guidance for event-based markets.
- Kalshi disciplines traders over insider activity: Two users were suspended and fined for trading on non-public information, including one tied to YouTube creator MrBeast content and another for trading on his own election market.
- Tribal gaming leaders press Congress: The Indian Gaming Association warned that sports event contracts could undermine tribal gaming compacts and state-regulated sportsbooks.
- Nevada court ruling revives enforcement case: Regulators in Nevada can proceed with action against Kalshi after an appeals court dissolved a prior injunction.
- New Jersey and Hawaii pursue bans: Lawmakers in New Jersey and Hawaii advanced legislation to restrict or ban prediction markets tied to sports outcomes.
Kalshi Reports $1B Super Bowl Trading Volume as Prediction Markets Surge
Kalshi said trading volume on Super Bowl Sunday surpassed $1 billion this year, representing a 2,700% increase from the previous year and setting a new daily record for the platform.
Total trading volume for the week leading up to the game reached $2.8 billion, driven by contracts tied both to the game itself and surrounding entertainment events, such as Bad Bunny’s halftime show. Markets linked to halftime performances, advertisements, and celebrity appearances generated significant activity, with some individual contracts exceeding $100 million in trading volume.
CFTC Plans New Rules for Prediction Markets
The Commodity Futures Trading Commission (CFTC) said it will develop new rules governing prediction markets, signaling a shift toward clearer federal oversight of event-based contracts.
Chairman Michael Selig said the agency intends to provide regulatory clarity for markets that allow traders to take positions on outcomes ranging from elections and economic data to sports and cultural events. As part of the shift, the CFTC withdrew a proposed 2024 rule that would have restricted contracts tied to sports and politics, and a later staff advisory urging caution in sports-related markets. As JustGamblers has continuously reported, there’s growing uncertainty among states in how to manage prediction markets alongside sports betting regulations. This new direction aims to reduce the uncertainty while ensuring market integrity and investor protections as the sector expands.
Kalshi Suspends Traders Due to Insider Trading
Speaking of integrity issues in prediction markets, last month, Kalshi issued disciplinary actions for two users, suspending and fining them in separate insider trading cases as the platform expands enforcement across its event-based markets.
One case involved a video editor for the YouTube creator MrBeast, who allegedly traded on non-public information about upcoming content. Kalshi imposed a two-year suspension and a financial penalty tied to approximately $4,000 in trades after surveillance systems flagged unusually accurate market activity.
In a separate case, former California gubernatorial candidate Kyle Langford received a five-year ban and financial penalty for placing trades on his own election market, which violates platform rules. Kalshi said it has opened roughly 200 investigations into potential trading violations over the past year and has referred recent cases to the Commodity Futures Trading Commission as scrutiny of prediction market integrity continues to grow.
Tribal Gaming Leaders Urge Congress to Restrict Sports Event Contracts
The Indian Gaming Association (IGA) urged Congress to curb sports-linked prediction market contracts, warning the products could undermine tribal gaming frameworks established under federal law.
At a Capitol Hill briefing, tribal leaders argued that sports event contracts offered on federally regulated derivatives platforms function in practice as sports betting products while avoiding the regulatory requirements applied to tribal and state-licensed sportsbooks. They said the markets lack safeguards such as geolocation controls, robust age verification, and revenue-sharing structures that support tribal governments and state programs. Industry representatives called on lawmakers to clarify that the Commodity Exchange Act does not authorize nationwide sports wagering through derivatives markets.
Nevada Appeals Court Clears Path for Action Against Kalshi Sports Contracts
A federal appeals court ruling has cleared the way for Nevada regulators to pursue enforcement action against Kalshi over sports-related event contracts offered in the state.
The Nevada Gaming Control Board filed a civil enforcement action after the United States Court of Appeals for the Ninth Circuit dissolved a prior injunction that had blocked state authorities from taking action. Regulators argue the contracts constitute unlicensed sports wagering under Nevada law and threaten the state’s regulated gaming industry.
Kalshi appealed, contending that its event contracts are derivatives governed by federal commodities law rather than state gambling rules, setting up a legal battle that could shape how prediction markets operate nationwide.
New Jersey and Hawaii Seeking to Ban Sports Event Contracts
Lawmakers in New Jersey and Hawaii are pursuing legislation aimed at restricting or banning prediction markets, particularly those tied to sports events.
In New Jersey, Senate President Pro Tempore Shirley K. Turner introduced bill S-3692 to prohibit certain prediction markets and require any sports-related event contracts to comply with the state’s regulated sports wagering framework. The proposal argues that markets offering contracts on sports outcomes function similarly to betting products but operate outside existing consumer protection rules. The move comes as the state remains in a legal dispute with prediction market operator Kalshi, which has maintained that its federally regulated event contracts are not subject to state gambling laws.
Meanwhile, a House committee in Hawaii unanimously advanced House Bill 2198, which would classify prediction markets as illegal gambling in the state, where all forms of wagering are currently prohibited.