US Prediction Markets Under Scrutiny: Kalshi Under Pressure, Billion-Dollar Business Grows

The world of prediction markets in the United States is in turmoil. A judicial defeat for Kalshi in New York has far-reaching consequences. At the same time, new tax laws and record trading volumes are driving the industry forward.

Regulators in several states are increasingly critical of these markets. They argue that many offerings should be classified as sports betting and thus subject to state regulation.

Numbers and facts

In June 2026, prediction markets reached a trading volume of over 50 billion US dollars. This is shown by estimates from a Macquarie Equity Research report. This places the annualized volume at over 500 billion US dollars. Kalshi dominated this market with approximately 33 billion US dollars in trading volume, accounting for around 65 percent of the total volume. In May, Kalshi's market share was still an estimated 57 percent.

Polymarket, another major player, is now seeking approval for margin trading in the US. This could make the sector even more attractive to institutional investors. The Commodity Futures Trading Commission (CFTC) has approved Optex Markets as a new exchange. The approval was granted within six months, highlighting the rapid development in this segment.

Background

The recent decision by a federal court in New York to reject Kalshi's motion for a preliminary injunction has set a precedent. Judge Analisa Torres emphasized that the regulation of gambling has historically been within the jurisdiction of the states. This decision is now being used by other states such as Connecticut, Illinois, Minnesota, Utah, and Wisconsin in their own lawsuits against prediction markets.

North Carolina has already introduced a new tax rate of 6 percent on the net trading revenue of prediction market operators. This is notable because the state has not established comprehensive licensing or regulation for these markets. Arizona Governor Katie Hobbs issued an order prohibiting state employees from insider trading on prediction markets. California, New York, and Illinois have also issued similar bans. Brian Quintenz, a former CFTC chair nominee, joined the Coalition for Prediction Markets as an advisor. This coalition advocates for the industry.

A closer look at the industry also reveals downsides. A Wall Street Journal analysis from May 2026 shows that only a few players on platforms like Polymarket and Kalshi actually make profits. These are mostly professional traders using data-driven algorithmic trading.

"I was about to be unable to pay my rent, but I got two years of rent through Kalshi's predictions." - Quote from a woman in a Kalshi ad on TikTok

This statement, according to the Wall Street Journal, does not reflect the reality for most users. John Pederson, a former chef, for example, lost $41,000 on Kalshi. He had previously turned $2,000 into $41,000, but lost it all on a daring bet. Regulators in Maryland, Nevada, and New Jersey have already ordered Kalshi to cease operations. They consider the platform's event contracts to be unlicensed sports betting. Massachusetts also sued Kalshi in September 2025 for "illegal and unsafe sports wagering." Attorney General Andrea Campbell argues that Kalshi's offerings are no different from a sports betting provider, which would have to be state-licensed, taxed, and regulated. Kalshi itself argues that it is a "fair, transparent, federally-regulated, and nationwide marketplace."

Why it matters for German players

For German players, these developments in the USA have no direct impact on offerings under German gambling regulation. In Germany, the State Treaty on Gambling 2021 (GlüStV 2021) largely prohibits prediction markets as they exist in the USA. The Joint Gambling Authority of the Federal States (GGL) only licenses online slots, online poker, and sports betting in Germany. Platforms offering such "prediction markets" are not permitted here. Players should therefore only use offers from providers listed on the GGL's whitelist. These casinos guarantee compliance with strict requirements, such as a stake limit of 1 euro per spin on slot machines and a monthly deposit limit of 1,000 euros. They are also connected to the central player exclusion system LUGAS. German players are thus protected from unregulated offers and the associated risks. The fierce disputes in the USA show how important clear regulation is for consumer protection.

What it means for GGL-licensed casinos

For operators of GGL-licensed casinos in Germany, this initially confirms the chosen path. The German State Treaty on Gambling, which came into force on July 1, 2021, has set clear boundaries for online gambling offerings. It explicitly prohibits such grey areas as unregulated prediction markets. GGL casinos must adhere to strict rules regarding player protection. These include technical measures for verifying players' identity and age, connection to the central LUGAS database for monitoring deposit limits, and excluding blocked players. The design of the games also protects against excessive incentives. The developments in the USA, where the lack of clear distinction between financial products and gambling markets leads to legal problems, underline the necessity of this clear regulation. German providers operate within a legally secure framework that protects consumers and at the same time enables a legal gambling offer.