Pennsylvania regulator criticizes prediction markets in comments to CFTC

Ziv Chen

6 May 2026 at 7:44am UTC-4

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The Pennsylvania Gaming Control Board has formally raised concerns with the Commodity Futures Trading Commission about the growing use of prediction market platforms.

In comments submitted ahead of potential federal rulemaking, the regulator argued that certain event-based contracts offered on prediction platforms closely resemble traditional wagering and may breach Pennsylvania law by offering unregulated forms of gambling.

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The Board also highlighted that the platforms do not take adequate precautions to prevent minors from using them.

In a letter, Pennsylvania Gaming Control Board Executive Director Kevin F. O’Toole wrote about the dangers of allowing wagering on certain real-world events.

“Today, the landscape has deteriorated. One cannot only wager upon the sporting events Senator Lincoln expressly warned, but also on pop-culture and political novelties such as whether a particular person will appear at the Met Gala, who will win Survivor – Season 50, and whether President Trump will utter the phrase ‘Make Iran Great Again’ during the month of April 2026 on Kalshi,” he said.

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Prediction market platforms have come under mounting pressure as several state regulatory bodies have commenced legal proceedings to ban them from their states this year for what they say is offering gambling without a license.

The platforms argue that they fall under the jurisdiction of the Commodity Futures Trading Commission and that states should not be allowed to interfere.

Last week, the Commodity Futures Trading Commission filed a lawsuit against Wisconsin in response to the state’s lawsuits against prediction market platforms.

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The Backstory

Why Pennsylvania is escalating the fight

Pennsylvania’s regulator has been laying groundwork for months to challenge the rapid expansion of event-based contracts on federally supervised prediction platforms. In October, the Pennsylvania Gaming Control Board urged the state’s congressional delegation to push back on sports prediction markets, warning they erode the state’s consumer protections and tax regime. That position was formalized again this spring when the board pressed federal regulators to scrutinize contracts that mirror wagers under state law, a stance that frames today’s clash as a jurisdictional test between Washington’s derivatives oversight and state-controlled gambling frameworks. The board’s concerns crystalized in a letter to lawmakers that described prediction platforms as a “backdoor” to sports betting, claiming they deploy weaker safeguards and lighter reviews than state sports books. The appeal to Congress is detailed in the board’s filing and in prior outreach to Pennsylvania’s federal delegation, including a public letter to Congress last fall available here, and echoed in coverage of the regulator’s drive to get lawmakers off the sidelines in a follow-up letter urging action against prediction markets.

The stakes for Pennsylvania are clear. The state imposes strict age checks, integrity monitoring and a 36% tax on licensed sports betting. If similar products proliferate via federally regulated venues with lighter consumer checks and no state taxes, the board argues it loses both control and revenue. That is why the regulator is seeking not just case-by-case enforcement, but a bright-line answer from the Commodity Futures Trading Commission on whether consumer-facing contracts tied to athletic performance, officiating or pop culture belong on a derivatives exchange at all.

Earlier warnings to casinos and sportsbooks

Before raising the volume in Washington, Pennsylvania targeted its own industry. At a House Gaming Oversight Committee hearing, Executive Director Kevin O’Toole warned licensees to avoid commercial ties with prediction platforms such as Kalshi and Polymarket, saying those apps operate “entirely outside” the state’s consumer protection and tax frameworks. The message was blunt: partnerships with such venues could jeopardize a casino’s license. Lawmakers at that hearing flagged the risk that users could shape outcomes, evade age verification and exploit a system that pays no state tax, unlike legal books. The testimony and reaction are summarized in the board’s warning to casino operators.

That in-state posture set up the latest move to confront the federal regime. Pennsylvania maintains that even when a venue claims CFTC oversight, many of its sports and pop-culture contracts look like retail wagering under the state’s 2017 gaming law. Officials have floated that those offers could be treated as unauthorized sports wagering for tax and enforcement purposes. The conflict is now spilling into courtrooms beyond Pennsylvania as states test how far their laws reach when federally designated markets list consumer event contracts.

League pressure and integrity concerns

Sports leagues have added muscle to the state regulators’ case. The NBA urged the CFTC to scrutinize prediction markets that list basketball outcomes, warning that prop-style contracts on player performance, officiating or injury information could proliferate without the monitoring common in regulated sportsbooks. The league drew a distinction between its partnerships with licensed books—where state regulators maintain continuous oversight—and federally supervised exchanges that lack a dedicated sports betting division. The NBA’s position, and its request to engage on guardrails if the markets are allowed to continue, is detailed in the league’s letter to the CFTC.

The NBA’s note followed a similar warning from Michigan regulators and tracks with Pennsylvania’s view that integrity protections developed for institutional derivatives do not translate neatly to retail speculation on game-related events. Together, those filings sharpen a core question for federal overseers: whether the surveillance, disclosures and conflicts checks built for hedging by sophisticated counterparties can realistically police consumer markets with real-time ties to athletes, referees and team personnel.

Federal crosscurrents at the CFTC

Even as state regulators and leagues press for limits, federal signals have been mixed. The agency continues to receive applications tied to sports and event contracts, and its leadership is in flux. President Donald Trump nominated Brian Quintez to return as chair, prompting scrutiny over his ties to Kalshi and crypto venture investing. Quintez pledged to divest but praised the “evolution and proliferation of new hedging tools such as event contracts.” His remarks and the confirmation dynamics underscore the policy divide on whether prediction markets serve price-discovery and hedging needs or function as retail betting by another name. The nomination hearing is archived by the Senate Agriculture Committee here, and Quintez’s prepared statement is available here. Coverage of the nomination’s implications for prediction markets is in our report on the CFTC nominee’s advocacy for prediction platforms.

Pennsylvania’s filings land as the CFTC juggles jurisdictional questions raised by state challenges and by consumer-facing platforms asserting federal preemption. The regulator has occasionally allowed self-certifications for novel contracts, a process state officials say offers minimal scrutiny relative to sportsbook licensing. A clearer federal standard on what constitutes permissible event contracts—and where limits are needed to avoid consumer confusion with gambling—would determine how much room is left for states to police their borders.

Crypto and exchanges move in

The industry is not waiting for regulatory clarity. Companies with federal licenses or pending applications are positioning to scale consumer event trading in the U.S. Crypto exchange Kraken agreed to buy the CFTC-licensed Small Exchange for $100 million, a move the firm said lays the foundation for a U.S.-native derivatives venue and signals interest in prediction markets. The strategy mirrors a broader trend: firms pursuing CFTC registrations to host sports and cultural event contracts that might be blocked under state gambling laws. The deal and broader market push are detailed in Kraken’s acquisition of the Small Exchange and its prediction market ambitions.

Others are advancing in parallel. Kalshi has expanded into sports event contracts, inviting disputes with regulators in Nevada, New Jersey and Massachusetts over whether those products are wagers under state law even when listed on a federally supervised exchange. Daily fantasy operator PrizePicks won National Futures Association approval through a subsidiary to explore a predictions product. And sports betting exchange RSBIX resurfaced with a new application to become a designated contract market. These moves raise the likelihood of a two-track system—federal venues offering event contracts, state books running traditional wagers—unless regulators converge on definitions.

What to watch next

Pennsylvania’s campaign suggests more state-federal friction ahead. The board has warned its licensees off partnerships with prediction platforms and wants Congress and the CFTC to draw firmer lines around consumer-facing event contracts. Leagues are unlikely to ease pressure as prop-style markets inch closer to on-field decisions and inside information. On the other side, exchanges and crypto-native firms are building federally supervised infrastructure to host these products at scale.

Whether the CFTC curbs or codifies sports and pop-culture contracts will determine who sets the rules for this fast-growing corner of retail speculation. A restrictive stance would validate state authority and push activity back into licensed sportsbooks. A permissive approach would elevate federal markets and intensify legal tests over preemption, taxes and integrity monitoring. For Pennsylvania, where sports betting has been tightly regulated since 2018, the outcome will decide how much control the state retains over products that look and feel like wagers—but increasingly claim the mantle of derivatives.