> ## Content Index
> Fetch the complete content index at: https://www.igamingnews.biz/llms.txt
> Use this file to discover other available public pages before exploring further.

# Kalshi and Polymarket's Preemption Defense Hits a Split
- URL: https://www.igamingnews.biz/prediction-markets-preemption-state-licensing/
- Published: 2026-08-26T12:00:00.000Z
- Updated: 2026-08-26T13:51:06.000Z
- Description: Four US jurisdictions moved against Kalshi and Polymarket in three weeks, and courts are splitting on whether federal law preempts state gambling rules.
- Author: iGamingNews Editorial Desk
- Tags: Analysis, Regulation

*Image credit: Source: court filings and state attorney general press releases, compiled by iGamingNews.*

**Four US jurisdictions moved against Kalshi and Polymarket in the space of three weeks this summer, and the rulings are splitting in opposite directions on the single legal theory the entire fight turns on: whether federal derivatives law preempts state gambling regulation of prediction markets.** If that preemption argument ultimately wins on appeal, it does not just settle two companies' fate. It puts a hole in the licensing, tax and tribal-compact architecture every state built after the Supreme Court's 2018 Murphy v. NCAA ruling opened sports betting to state control in the first place.

**The four fronts:**

- **July 28, Minnesota.** US District Judge Katherine Menendez blocked the state's felony ban on prediction markets, due to take effect August 1, finding Kalshi and Polymarket "likely to succeed" on their argument that the Commodity Exchange Act preempts the state statute and that enforcing the ban would cause the companies irreparable harm.
- **July 31, New York.** Attorney General Letitia James sued Kalshi, seeking a court order to stop it operating as an unlicensed gambling business, forfeiture of its gains, treble damages and consumer restitution. "No matter what they call themselves, prediction markets like Kalshi are gambling platforms, plain and simple," James said. Governor Kathy Hochul added: "Kalshi has chosen to ignore New York's gaming laws. This choice has consequences."
- **August 13, Washington.** A King County Superior Court judge issued a final order requiring KalshiEX to stop offering wagers on sports, elections, politics, entertainment, culture and technology topics to Washington residents, with hard deadlines: IP and residency-based geofencing by August 19, and a multi-source geofencing system by September 2\. Attorney General Nick Brown said Kalshi "has gotten rich promoting wagers on sports, elections, natural disasters" and more, and is now "banned from offering wagers on most of those topics in Washington."
- **Mid-August, Baltimore.** Mayor Brandon Scott and the Baltimore City Council sued Kalshi and Polymarket under the city's Consumer Protection Ordinance, a municipal government suing directly rather than leaving the fight to a state attorney general. "These companies are running sportsbooks without licenses and betting that a new label will put them above the law," Scott said. "It won't."

Minnesota is the outlier, and it is the one that matters most. Every other ruling on this list treats prediction markets as gambling subject to state control, the same conclusion a federal judge reached in the [Connecticut case this desk covered in August](https://www.igamingnews.biz/kalshi-connecticut-injunction-denied/), when the court found sports event contracts are "at bottom, they are sports wagers," not swaps. Minnesota is the first court to find the opposite argument likely to win: that because Kalshi and Polymarket are regulated federally as designated contract markets under the Commodity Futures Trading Commission, no state can reach them with its own gambling law at all, full stop.

That is a different, larger claim than anything at issue in [Kalshi's tax fight with Illinois](https://www.igamingnews.biz/kalshi-illinois-prediction-market-lawsuit/) or the [geofencing compliance deadlines Nevada and Michigan set](https://www.igamingnews.biz/kalshi-nevada-michigan-geofencing-deadline/). Those cases assume states retain some authority and argue about its limits. Minnesota's injunction, if it survives appeal, would mean states have no authority to reach federally regulated event contracts in the first place, regardless of what the contract is about.

For an industry that has spent eight years building a state-by-state compliance business, that is the scenario worth taking seriously even at the preliminary-injunction stage. Every operator licensing fee, every state betting tax, every tribal gaming compact negotiated since 2018 assumes states can define and control gambling within their borders. Congress has started paying attention to the same gap: the Senate Committee on Indian Affairs held a roundtable in early August on what unregulated federal event contracts mean for tribal compacts that took decades to negotiate and depend entirely on states having jurisdiction to exclude competitors.

None of this is settled. Washington's order and New York's suit both proceed on the assumption that states can act, and neither has yet had to answer Minnesota's preemption theory head-on in front of an appeals court. Baltimore's suit is too new to have a ruling at all. But the pattern is now four jurisdictions deep and growing, and DraftKings and Flutter, both suing or lobbying against the same prediction market operators they are also racing to compete with directly, have the most to lose either way this splits.

## The theory, not the tally, decides this

Four rulings against two outcomes is not a scoreboard yet. It is a live argument about whether a federal license can erase fifty states' worth of gambling law, and that argument does not get settled by counting how many states have sued. It gets settled by the first appellate court willing to rule on preemption itself.

**Related:** [Kalshi Loses Bid to Block Connecticut's Gambling Law](https://www.igamingnews.biz/kalshi-connecticut-injunction-denied/) | [Kalshi Sues Illinois to Block Prediction Market Betting Tax](https://www.igamingnews.biz/kalshi-illinois-prediction-market-lawsuit/) | [Kalshi Faces Geofencing Deadlines in Nevada and Michigan](https://www.igamingnews.biz/kalshi-nevada-michigan-geofencing-deadline/)