Posted on: February 20, 2026, 02:28h.
Last updated on: February 20, 2026, 02:28h.
- Bank says states positioned to continue legal success against prediction markets even with CFTC getting involved
- Kalshi scored a legal win in Tennessee this week
- TD Cowen believes Crypto.com Nevada case will advance to SCOTUS
Kalshi won a preliminary injunction in Tennessee this week, marking what feels like the first legal win an eternity for prediction market operators, but some experts believe states will continue prevailing against the industry.
In a recent report, analysts at TD Cowen note that even with intervention by the Commodities Futures Trading Commission (CFTC), which regulates predictions markets, states still hold advantages over yes/no exchanges in various legal battles.
We continue to give a slight edge to the states in this legal fight primarily because the states have historically been the regulators of sports gambling,” wrote Jaret Seiberg, managing director at TD Cowen’s Washington Research Group.
The TD Cowen report was published prior to news of the Kalshi Tennessee ruling emerging. In that case, Judge Aleta Trauger of the US District Court for the Middle District Court of Tennessee granted the prediction markets firm a preliminary injunction to continue operating in the state, noting sports event contracts are swaps under the Commodities Exchange Act (CEA). However, there are no promises other judges will concur with her ruling, confirming yes/no exchanges still face state-level legal headwinds.
Crypto.com Nevada Case Likely Heading to SCOTUS
TD Cowen also noted that the case involving Crypto.com and the Nevada Gaming Control Board (NGCB), which currently rests with the Ninth Circuit Court of Appeals, is likely heading to the Supreme Court.
Nevada, as it is with other prediction operators, is attempting to block Crypto.com from offering sports event contracts in the state. The state argues those derivatives are nothing more than unregulated sports wagering. The brokerage firm fired back, noting the state doesn’t have the authority to bar from offering those contracts there because the company is federally regulated.
Earlier this week, the CFTC filed an amicus brief with the appeals court, noting states cannot supersede the commission’s regulatory authority over designated contract markets (DCMs), of which Crypto.com is one, adding that when states attempt such interventions, it violates the spirit of the CEA.
“The 9th Circuit appeal could spill into 2027 especially if there is a request for an en banc review,” adds Seiberg. “This means the justices probably do not hold arguments in the case until the fall of 2027 and don’t decide the case until early 2028.”
That outlook jibes with previous perspectives issued by other legal experts that have said it’s not a matter of if the Supreme Court will hear prediction markets cases, it’s a matter of when.
‘Messy Politics’
Not surprisingly, politics clearly play a role in the state-level legal maneuverings involving prediction markets and regulators. That extends to the federal level where there is increasing though arguably misplaced sentiment favoring prediction markets is a strictly Republican theme.
Much of that stems from Donald Trump Jr. being an advisor to both Kalshi and Polymarket and an investor in the latter, but it’s frequently ignored that many of the venture capitalists backing prediction markets lean heavily to the left. Add to that, Kalshi’s newly hired lead federal lobbyist is a Democrat.
“The politics of this are messy,” Seiberg observes. “There are many Republicans who oppose sports gambling and do not want prediction markets to be a way to get around prohibitions in their states. This also raises questions about states’ rights, which Republicans typically champion. It is why we do not assume that the Republican-controlled Congress will act to protect prediction markets.”