Prediction Market Platforms Face Scrutiny as States Debate Sports Betting Expansion

As Washington looks into expanding its sports betting market, scrutiny has arisen over prediction markets like Kalshi and how states can compete going into tournaments like March Madness.

Ziv Chen

Last Updated: March 13, 2026 9:48 AM EDT • 2 minute read

Pictured: The Gonzaga Bulldogs celebrate as we look at prediction market scrutiny as states expand sports betting. Photo by Kyle Terada-Imagn Images

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Prediction market sites are rekindling the debate on sports betting regulations in the US. With Kalshi and other sites creating pre-game buzz ahead of major sporting events like March Madness, regulators and lawmakers are trying to determine how they fit into the US sports betting landscape.

Professor Len Mead of Southern Connecticut State University said prediction market apps differ from the best sports betting sites because they operate as exchanges where users buy contracts tied to event outcomes. Under US law, these markets are classified as commodity trading rather than gambling, allowing them to operate under federal oversight rather than state gaming frameworks.

The Commodity Futures Trading Commission has asserted that prediction markets fall within its jurisdiction. This is at the center of several active legal cases across the country.

At the state level, lawmakers who oversee the Washington sports betting market are reviewing Senate Bill 6137, which would permit betting on in-state college teams, including Washington State University and Gonzaga University. Supporters of the bill argue that legalizing wagers on local college programs would shift activity away from illegal betting markets and into regulated environments.

University officials and some policymakers have expressed concerns about expanding access to sports betting. Critics have pointed to reports of gambling scams and harassment directed at athletes as the availability of wagering increases nationwide.

The bill would prohibit wagers on individual player prop bets involving local college teams. Sportsbooks and casinos also monitor betting activity and line movements for unusual changes that could indicate suspicious wagering patterns.

Concerns about gambling addiction remain part of the broader discussion surrounding sports betting expansion. Industry representatives say casinos provide responsible gambling resources and staff training to help identify and support individuals seeking assistance.

Michigan lawsuit targets prediction market platform

There are legal challenges to prediction markets in several states. This month, Michigan Attorney General Dana Nessel sued Kalshi for offering online sports betting to residents in the Michigan sports betting market without permission from the Michigan Gaming Control Board.

The lawsuit against Kalshi alleges that the company's contracts constitute sports betting and are in violation of Michigan’s Lawful Sports Betting Act. State regulators contend that by offering these contracts to Michigan users, the platform effectively operates an unlicensed sports betting service.

The filing also claims that the platform lacks the responsible gambling safeguards required for licensed sportsbook operators in the state. Regulators argue that without oversight from the Michigan Gaming Control Board, there is no verification that consumer protections meet state standards.

Nessel is seeking a permanent injunction that would prevent Kalshi from advertising or offering its event contracts in Michigan. The lawsuit states that companies cannot bypass state gaming laws by structuring wagers as trading contracts tied to sporting results.

Michigan is not the only jurisdiction to scrutinize the platform. New York, Arizona, and several others have also targeted prediction market operators.

Written by:
Ziv Chen

Ziv has over two decades of experience in the igaming and sports betting industry, having served in senior marketing and business development positions with both B2C and B2B companies, including Playtech and Microgaming. In 2019, Ziv decided to pursue his passion for writing and became a fulltime industry journalist, covering casino, sports, and gambling business news. He’s specialties include casino games and technology, US state gambling regulation, company performance, as well as gambling affiliates and marketing. As a Pitt graduate, Ziv is a diehard fan of all Pittsburgh sports teams, with the Steelers at the top of the list. In his free time, he enjoys reading crime fiction, biographies (mainly of sports personalities, but not only) and American history. Ziv’s Favorite quote: “We're going to pursue perfection, knowing full well we won't catch it, but we're going to relentlessly chase it," Mike Tomlin, Pittsburgh Steelers Head Coach.