Kalshi and Polymarket Expand as States Step Up Enforcement

The fast-growing prediction market industry confronted a new wave of regulatory and commercial developments this week, as platforms expanded operations, raised capital, and encountered fresh legal obstacles. The activity underscored both rising investor interest and persistent uncertainty over how event-trading products should be treated under U.S. law.

 

Entity	This week	Legal status	Note
Kalshi	Sued Connecticut; $1B round	Facing multiple state actions	Claims CFTC regulation; media deals
Polymarket	Limited U.S. rollout to waitlist	Operating amid regulatory uncertainty	NYSE-owner investor; featured on 60 Minutes
Regulators (e.g., CT)	Cease-and-desist letters issued	Argue markets are illegal betting	Demand shutdown & fund returns
NFL	Declined partnerships for now	Monitoring legal developments	Cites brand risk as main concern

 

Connecticut Escalates Regulatory Actions

Connecticut became the latest state to move against unlicensed prediction market activity, issuing cease-and-desist letters to Kalshi, Robinhood, and Crypto.com. Regulators accused the platforms of operating illegal sports betting services and warned they pose a “serious risk” to consumers because they fall outside state oversight.

The letters ordered the companies to halt operations in the state, return customer funds, and warned of additional enforcement if they fail to comply. “These platforms are deceptively advertising that their services are legal, but our laws are clear,” said Kris Gilman, director of gaming at the Department of Consumer Protection. Gilman added that prediction market wagers “are not an investment” and lack basic consumer safeguards.

Within hours, Kalshi sued the state in federal court, mirroring legal actions it has filed in Maryland, Nevada, New Jersey, New York, and Ohio following similar state directives. The company argues that its markets are federally regulated by the Commodity Futures Trading Commission (CFTC), giving it the authority to operate nationwide.

Regulatory disputes continue across several jurisdictions. A class-action lawsuit was filed against Kalshi in New York this week. In Nevada, a federal judge reversed an earlier injunction that had temporarily blocked the state from enforcing its gambling rules against the platform. Massachusetts is set to hold a court hearing next week as part of a lawsuit brought by state Attorney General Andrea Campbell, who seeks to stop Kalshi from offering sports-related event contracts.

Tribal authorities in California and Wisconsin have also argued that prediction markets violate the Indian Gaming Regulatory Act when operating on tribal land. A California judge recently sided with Kalshi, ruling that CFTC oversight means the contracts do not qualify as wagers under state law.

 

Kalshi Raises $1 Billion as Media Partnerships Expand

Despite mounting litigation, Kalshi secured a third fundraising round this year, announcing a $1 billion investment that values the company at $11 billion. Backers include Sequoia Capital, Andreessen Horowitz, ARK Invest, and other major venture firms. The valuation more than doubles the $5 billion figure from an October round. “We’re in a massive market with a massive opportunity,” CEO Tarek Mansour told The New York Times. “We have to scale up to rise to that opportunity.” Kalshi also expanded its media presence, with both CNN and CNBC agreeing to feature real-time data from the platform. CNBC President KC Sullivan said Kalshi’s forecasts will complement the network’s reporting by offering additional context on major events.

Rival Polymarket, which raised funds earlier this year from the owner of the New York Stock Exchange, began a limited U.S. rollout to more than 200,000 waitlisted users. The platform had been operating in beta prior to the expansion, and received national exposure this week through a segment on CBS’s 60 Minutes. The company’s U.S. rollout coincides with heightened regulatory attention toward the sector, though Polymarket has not faced the same volume of legal challenges as Kalshi. In contrast to the National Hockey League—which previously formed partnerships with Kalshi and Polymarket—the NFL signaled it will remain on the sidelines for now.

At Genius Sports Investor Day, Commissioner Roger Goodell said the league is not prepared to enter the space, citing regulatory uncertainty and the potential impact on the NFL’s brand. “That’s not something we’re about to enter into,” Goodell said. “There are a lot of legal challenges going on right now… The risk to the brand is something that we take very seriously.”

“These platforms are deceptively advertising that their services are legal… A prediction market wager is not an investment.

 

Industry Momentum Meets Regulatory Resistance

The burst of activity this week highlights diverging paths for leading prediction market operators. Kalshi continues to pursue nationwide expansion backed by substantial capital while battling regulators on multiple fronts. Polymarket is moving into the U.S. consumer market, and major sports leagues remain split on whether to engage with the industry.

At the same time, Fanatics entered the space with its new Fanatics Markets platform, beating DraftKings and FanDuel to market in what has become a crowded and contentious landscape.

As prediction markets grow in visibility and investment, policymakers remain divided over whether these platforms represent financial products, gambling, or a hybrid model that existing laws were not designed to address. The outcome of the current legal fights will shape how—and where—prediction markets can operate in the United States.