Something unusual happened in February 2026. Robinhood — better known for disrupting stock trading — found itself in a legal standoff with the Washington State Commission over a product that doesn't look like at all.
The product in question: event contracts. Users bet real money on whether inflation will hit a certain threshold, whether a particular bill will pass Congress, or who will win a championship. Robinhood argued this is financial trading. Washington state said it's . A federal court had to step in.
That case is still unresolved. But it's already the most important legal fight in American since New Jersey took on the federal government over PASPA back in 2011 — and won.
Prediction markets have been around longer than most people realize. Kalshi launched in 2021 after receiving CFTC approval, giving it a federal regulatory umbrella that state commissions can't easily touch. Polymarket operates offshore and has attracted hundreds of millions in trading volume without a single state license.
The model is simple: you buy a contract that pays out $1 if an event happens, and nothing if it doesn't. The price of that contract — say, 62 cents — reflects the market's implied probability of the outcome. It's closer to options trading than a parlay bet, which is exactly why the CFTC regulates it and not the Nevada Gaming Control Board.
DraftKings figured this out and launched its own prediction market offering in late 2025. FanDuel's parent company Flutter flagged it as a competitive concern in its most recent earnings call. When the two largest US sportsbook operators start paying attention, the rest of the industry follows.
New Jersey has more at stake than most states. It was the first to offer legal online sports after PASPA fell, and Atlantic City operators have spent years building out their digital platforms. If prediction markets can operate nationally under federal jurisdiction — bypassing state licensing entirely — that's a direct challenge to the revenue model those operators depend on.
The Division of Gaming Enforcement hasn't issued formal guidance yet. But conversations are happening. Industry attorneys in Trenton say the Robinhood case will likely force the issue regardless of how it's resolved — either by clarifying federal preemption or by pushing states to define event contracts explicitly in their statutes.
The honest answer is nobody knows. The CFTC under the current administration has shown more appetite for innovation than its predecessors. Congress has shown almost no appetite for writing new law. And state regulators, who move slowly by design, are watching a market that moves fast.
What's clear is that prediction markets are no longer a niche product. They handled over $3 billion in volume during the 2024 election cycle alone. That number will be higher in 2026.
For ongoing coverage of how US and international regulators are responding to this shift, PMP Media tracks prediction market regulation alongside broader iGaming licensing developments.
