Iowa lawmakers are moving to assert state control over prediction markets, proposing a regulatory framework that would impose steep upfront fees and ongoing taxes on platforms that allow users to trade on future events such as elections or economic outcomes. Senate File 2085, introduced by State Sen. Mike Kilmesh, would require prediction market operators to obtain a state permit before offering services to Iowa residents. The permit would cost $10 million upfront, followed by a 20% tax on operator earnings and an annual $100,000 licensing fee.

If enacted, the bill would place prediction markets under a regime similar to high-end casino licensing, signaling that Iowa views these platforms less as financial exchanges and more as a form of gambling subject to state authority.

A challenge to federal regulators

Prediction markets are currently overseen at the federal level by the Commodity Futures Trading Commission (CFTC), which classifies the products as “event contracts,” a type of financial derivative. Under this framework, platforms argue they are participating in regulated financial markets rather than operating sportsbooks.

Iowa regulators disagree. Their position is that contracts tied to real-world outcomes function like wagers, regardless of how they are labeled. Under state law, gambling regulation falls squarely within state jurisdiction.

By creating its own permitting system, Iowa would effectively require platforms to comply with state rules even if they already operate under federal approval. The bill sends a clear message: federal oversight alone is not sufficient to do business in Iowa. The move comes amid growing legal conflict between states and major prediction market operators, including Kalshi. In Massachusetts, a state judge recently blocked Kalshi from offering sports-related contracts, ruling that the products closely resembled unlicensed sports betting.

Kalshi has taken the opposite position in court filings in Nevada and New Jersey, arguing that federal law preempts state gambling restrictions and that CFTC approval should allow nationwide operation. Iowa’s proposal sidesteps that debate by focusing on state access. Under the bill, the question is not whether the platforms are legal under federal law, but whether they are willing to meet Iowa’s financial and regulatory demands.

Iowa is signaling that prediction markets will be treated like gambling operations, regardless of their federal classification.

A broader national trend

Iowa is not alone in tightening oversight of prediction markets. Lawmakers in New York are advancing the ORACLE Act, which would create a separate state regulatory framework and prohibit certain categories of trades, particularly those involving sports or political outcomes.

At the federal level, U.S. Rep. Ritchie Torres has introduced the Public Integrity in Financial Prediction Markets Act of 2026. The bill would bar federal officials and executive branch employees from trading on political prediction markets if they have access to nonpublic information, aiming to reduce the risk of insider trading tied to government actions.

Together, these efforts reflect growing scrutiny of an industry that sits at the intersection of finance, gambling, and politics. As prediction markets expand in popularity and profitability, both states and federal lawmakers appear increasingly determined to claim regulatory authority—and a share of the revenue.