Prediction Markets at the Supreme Court: Crypto.com and Robinhood Demand Clarity

The battle over the legal classification of prediction markets in the United States has reached a critical boiling point. Major industry players, including Crypto.com and Robinhood Markets, have filed petitions with the Supreme Court of the United States to settle a growing jurisdictional dispute. At the heart of the matter is whether state gaming regulators have the authority to intervene in the trading of event contracts, or if these markets fall under the exclusive federal oversight of the Commodity Futures Trading Commission (CFTC). The platforms argue that their offerings are not gambling but rather complex financial instruments protected by the Commodity Exchange Act (CEA).

This dispute represents an existential threat to the industry. A classification as gambling would require platforms like Kalshi and Polymarket to obtain individual licenses in every state, a process that is both costly and legally burdensome. Currently, the situation is further complicated by a political rift. The Trump administration is seeking to maintain federal control over these markets, while a bipartisan coalition of 44 state attorneys general is fighting to preserve state-level gambling oversight. This discrepancy has created a legal patchwork that stifles innovation and leaves both operators and users in a state of uncertainty.

Numbers and facts

The legal foundation of this conflict is the Commodity Exchange Act of 1936, which established the statutory framework for the CFTC. The act, amended several times, grants the CFTC the authority to publish regulations in Title 17 of the Code of Federal Regulations. The urgency for Supreme Court intervention stems from conflicting rulings in lower courts. The U.S. Court of Appeals for the 3rd Circuit recently voted 2-1 to block New Jersey from enforcing its sports gambling laws against Kalshi. Conversely, the 9th Circuit Court of Appeals ruled just last week in favor of Nevada regulators, forcing Kalshi to shutter its local operations immediately.

Terminology remains a major point of contention. Gaming regulators argue that prediction markets extensively use betting language to attract customers while simultaneously claiming in court that they are not gambling platforms. Dylan Hedtler-Gaudette, acting vice president of policy at the Project on Government Oversight, noted that this is not merely a partisan issue but a fundamental question of federalism. If sports wagering contracts are defined as "swaps," they fall under CFTC jurisdiction. If they are deemed bets, they fall under the strict, established regulations that states have applied to casinos and racetracks for decades.

Background

The debate has gained significant public attention due to high-profile involvement. Donald Trump Jr., the son of the former president, joined Kalshi as a strategic adviser in 2025 and holds a financial stake in the company. This puts the administration's stance in direct opposition to many Republican attorneys general who view state sovereignty as paramount. Howard Fischer, a partner at Moses Singer and former SEC prosecutor, suggests that state departments are actually better equipped to handle the oversight of these markets due to their larger staffing levels compared to federal agencies.

"Rather than have dedicated departments in every state with 10, 20, 30 or more people, you’re going to have one, or two, maybe, people at the federal level who may or may not be former employees of the prediction markets." - Howard Fischer, Partner at Moses Singer

This concern regarding a weak federal oversight is shared by many experts. Meanwhile, trading volumes on these platforms are exploding as users wager on everything from election results to central bank interest rate hikes. Platforms maintain they provide a public service by aggregating collective intelligence and offering more accurate predictions than traditional polling. However, for regulators in Atlantic City and Las Vegas, these markets appear to be direct competitors attempting to bypass the strict requirements of player protection and taxation.

Why it matters for German players

In Germany, the situation is much clearer due to the Interstate Treaty on Gambling 2021 (GlüStV 2021). Providers of online slots or sports betting must be listed on the official whitelist of the Joint Gambling Authority of the States (GGL). Prediction markets offering wagers on political or social events face significant hurdles in Germany, as the catalog of permitted bets is strictly limited. For German users, the U.S. conflict serves as a warning: engaging with foreign platforms like Kalshi or Polymarket without a GGL license is considered illegal gambling. These platforms do not adhere to German safety standards, such as the 1,000 Euro monthly deposit limit, the LUGAS monitoring system, or the 1 Euro per spin stake limit.

What it means for GGL-licensed casinos

Licensed German casinos currently face no direct threat from event contracts, as the GGL is unlikely to approve such hybrid financial-betting products. However, the case involving Crypto.com and Robinhood demonstrates how the line between trading and gambling is blurring globally. Licensed operators in Germany benefit from the legal certainty that U.S. platforms currently lack. While American courts argue over federal versus state preemption, the GlüStV 2021 provides a stable framework. Operators who comply with these strict rules are protected from sudden market exclusions, such as those seen in Nevada, as long as they maintain their player protection standards.