Published on: February 20, 2026, 02:28h.
Updated on: February 20, 2026, 02:28h.
- Bank indicates states likely to maintain legal advantages against prediction markets despite CFTC involvement
- Kalshi achieved a legal victory in Tennessee recently
- TD Cowen predicts Crypto.com Nevada case will progress to SCOTUS
This past week, Kalshi secured a preliminary injunction in Tennessee, marking what appears to be a significant legal victory for prediction market platforms. However, some analysts believe that states will continue to achieve favorable outcomes against these markets.
In a recent summary, TD Cowen analysts suggest that despite the Commodities Futures Trading Commission (CFTC) stepping in, which oversees prediction markets, states still possess certain advantages in legal disputes surrounding yes/no exchanges.
“We continue to favor states in this ongoing legal struggle, mainly because they have historically overseen sports gambling regulations,” indicated Jaret Seiberg, managing director at TD Cowen’s Washington Research Group.
The TD Cowen analysis was shared before the news of Kalshi’s ruling in Tennessee was made public. In this instance, Judge Aleta Trauger of the U.S. District Court for the Middle District of Tennessee granted a preliminary injunction allowing Kalshi to continue its operations within the state, arguing that sports event contracts qualify as swaps under the Commodities Exchange Act (CEA). Nonetheless, there is no assurance that other judges will reach the same conclusion, implying that yes/no exchanges could still confront state-level legal obstacles.
Crypto.com vs. Nevada Case Set for SCOTUS
TD Cowen noted that the ongoing case involving Crypto.com and the Nevada Gaming Control Board (NGCB), currently pending in the Ninth Circuit Court of Appeals, is likely to ascend to the Supreme Court.
Nevada is opposing Crypto.com’s attempt to provide sports event contracts within its jurisdiction, claiming that these derivatives are just unregulated sports bets. In response, Crypto.com argues that Nevada lacks the authority to impede their offerings, as the company is under federal regulation.
This week, the CFTC submitted an amicus brief to the appeals court, asserting that states cannot supersede the commission’s regulatory power over designated contract markets (DCMs), of which Crypto.com is one. The brief also suggested that state intervention conflicts with the intent of the CEA.
“The 9th Circuit appeal might extend into 2027, especially if there’s a request for an en banc review,” Seiberg mentioned. “This implies that the justices might not hold hearings on the matter until the fall of 2027, with a decision expected in early 2028.”
This perspective aligns with insights from other legal experts, who note that it’s not a question of whether the Supreme Court will hear cases regarding prediction markets, but rather when such cases will be brought before them.
Complex Political Landscape
Unsurprisingly, political dynamics significantly influence the state-level legal strategies concerning prediction markets and their regulation. This political sentiment extends to the federal level, where increasing but arguably misplaced support for prediction markets appears to be largely associated with Republican ideologies.
This perception is influenced by Donald Trump Jr.’s advisory roles with Kalshi and Polymarket, as well as his investment in Polymarket. However, it often overlooks the fact that many venture capitalists supporting prediction markets lean towards leftist ideology. Additionally, Kalshi has recently appointed a Democrat as its top federal lobbyist.
“The political landscape surrounding this issue is quite complicated,” remarks Seiberg. “Several Republicans oppose sports betting regulations and do not want prediction markets to bypass state restrictions. This situation raises fundamental questions regarding states’ rights, a principle that Republicans generally advocate. Hence, we cannot take for granted that the Republican-majority Congress will take steps to safeguard prediction markets.”