Published on: January 26, 2026, at 09:58h.
Updated on: January 26, 2026, at 09:58h.
- Iowa legislation aims to mandate state licenses for prediction markets
- Licensing fees would be significant, starting with a $10 million upfront payment
- Prediction market operators assert that federal regulations take priority over state laws
The Commodity Futures Trading Commission (CFTC) regulates prediction markets, but Iowa lawmakers are looking to gain jurisdiction over their operations within the state.
Since the emergence of derivative trading platforms offering sports-related contracts last year, prediction markets have been under scrutiny from state attorneys general, regulatory bodies, and lawmakers. Groups like the American Gaming Association and Indian Gaming Association have urged both the CFTC and Congress to halt sports contract offerings, labeling them as unlawful sports betting that breaches state gambling regulations.
In Iowa, state legislators are taking action on the prediction markets issue.
Senate File 2085, proposed by Iowa Majority Leader Mike Klimesh (R-Howard), mandates that prediction markets acquire a license to operate within Iowa.
Iowa’s Proposed Prediction Markets Legislation
The SF2085 bill stipulates that only prediction markets licensed by the Iowa Department of Revenue may engage in derivative trading throughout the state.
The financial barrier for entry would be substantial, with licenses priced at an initial fee of $10 million. Additionally, these licenses would require annual renewals at $100,000. The operating costs do not stop there: prediction markets would also need to remit 20% of their gross trading revenues from Iowa to the state treasury.
Current prediction market operators impacted by these regulations may include Kalshi, DraftKings Predictions, FanDuel Predicts, PrizePicks, and Fanatics Markets.
Senator Klimesh took office last September after succeeding former state Sen. Jack Whitver (R-Polk). His legislative agenda for 2026 not only includes regulating prediction markets but also focuses on expanding carbon dioxide pipeline projects, improving energy affordability, and promoting bipartisan solutions in Des Moines.
Challenging the Proposed Regulations
Kalshi and similar platforms are actively defending their operations in various legal settings, asserting that their CFTC oversight prevails over state regulations, including those relating to gaming, due to the Supremacy Clause of the U.S. Constitution.
However, CFTC-regulated derivative markets are prohibited from engaging in contracts associated with gambling.
An event contract, or prediction contract, is a derivative instrument with payoffs conditioned on specific events or metrics, including macroeconomic indicators, corporate earnings, snowfall totals, or damages from events like hurricanes. According to CFTC Regulation 40.11, event contracts that pertain to violence, assassination, warfare, sports betting, or any activity deemed illegal under state or federal law, or any activity that the CFTC identifies as contrary to public interest, are strictly prohibited.
Senate File 2085 has been forwarded to the Iowa Senate Ways and Means Committee for an initial assessment.