Regulators on both sides of the Atlantic are wrestling with how to classify prediction markets, which can look economically similar to sportsbook wagers but operate under different legal and market structures. In the United States, the dispute reached the Supreme Court in September 2026, while Britain’s Financial Conduct Authority has held preliminary industry discussions about potentially reopening retail access to financial event contracts.
A key distinction is the underlying product. Sportsbooks generally act as counterparties and set odds, while prediction markets such as Kalshi match buyers and sellers on an exchange. Kalshi says it earns revenue primarily from transaction fees rather than customer losses, and each contract identifies its resolution criteria before trading. A “yes” contract priced at 63 cents implies roughly a 63 percent market probability, but traders can often resell before settlement, making the product behave more like a financial derivative than a fixed sportsbook wager.
That distinction has produced conflicting legal outcomes. In September 2026, New Jersey asked the U.S. Supreme Court to decide whether states can apply gambling laws to sports contracts offered by federally regulated prediction markets. A federal appeals court previously sided with Kalshi, while a court in Nevada reached a different conclusion. The CFTC argues that federal commodities law gives it authority over contracts traded on registered exchanges, and in 2026 it sued New Mexico after the state attempted to apply gaming laws to Kalshi sports markets. The regulator withdrew an older event-contract proposal in February 2026 and later opened a new rulemaking process focused specifically on prediction markets.
In the United Kingdom, the FCA has held talks with trading platforms about potentially reopening retail financial prediction markets, according to a Times report, but no public consultation, proposed rule, or implementation date has been announced. The regulator’s published position still treats prediction contracts linked to financial and certain climate events as binary options, which have been permanently banned for retail consumers since April 2019. Sports, political, and other non-financial contracts generally fall under Gambling Commission oversight, meaning a platform offering multiple contract categories could require approvals from both regulators.
Industry representatives reportedly told the FCA that millions of Britons are using overseas platforms such as Kalshi and Polymarket, sometimes bypassing geographic restrictions through virtual private networks. Those customers may lack access to the Financial Ombudsman Service, the Financial Services Compensation Scheme, or other domestic protections. Any reversal would require formal FCA proposals covering product governance, appropriateness assessments, marketing, disclosure, position limits, and loss protections.
The sector’s financial scale is growing quickly. Robinhood generated $156 million from event contracts in Q2 2026, more than the $129 million it earned from equity trading, with users trading 13.6 billion event contracts during the quarter. However, no cryptocurrency token is directly implicated in these regulatory developments, even though blockchain-based platforms such as Polymarket remain part of the broader prediction-market landscape.
