As UFC fighters battled one another on the White House South Lawn in June.
Another fight was taking shape around the tournament’s cage — which was plastered with advertisements for Polymarket.
Prediction markets, including Polymarket, a co-sponsor of the event, and Kalshi, are at the center of a growing legal battle between the Trump administration and states over how the rapidly expanding industry should be regulated.
New York state sued Kalshi in July, alleging that the company is illegally operating as a gambling platform and skirting the state’s 51% sports betting tax, which is paid by similar platforms such as DraftKings.
“My goal is to make sure that anyone operating in the state of New York follows our laws. It is that simple,” Gov. Kathy Hochul said.
Kalshi allows users to wager on events ranging from ballgames to elections. But company leadership said it is not a gambling platform.
“Just because two things touch on sports does not make both the same,” Bobby Denault, the head of regulation for Kalshi, told Spectrum News.
DeNault argued that Kalshi users are trading event contracts on a financial exchange and therefore the platform should remain solely regulated by the U.S. Commodity Futures Trading Commission rather than state entities.
New York officials reject that argument, accusing Kalshi of exploiting a minute legal argument to avoid state regulation and taxes.
“We’ll go to court and make sure that the rule of law prevails,” DeNault said.
It is a legal battle Kalshi is waging with the support of the Trump administration.
The CFTC, a federal agency headed by presidential appointee Mike Selig, has, according to its own website, taken legal action against New York and eight other states in an effort to maintain exclusive authority over prediction markets.
In May, the president wrote on Truth Social that “It is critically important that the CFTC’s exclusive authority over Prediction Markets [sic] is maintained, and that they will thrive.”
While the position is antithetical to conservatives’ historic prioritization of states’ rights, attorney Dan Wallach, who founded the country’s first sports-betting law firm, said the explanation is simple.
“President Donald Trump,” he told Spectrum News.
Wallach points to the financial dealings of the president’s son, Donald Trump Jr.
Trump Jr. is an adviser to Polymarket, where his venture capital firm is a major investor. He is also an adviser to Kalshi — where Wallach said his $300,000 in company gifted equity shares, is now estimated to hold more than $20 million in value.
“On the third day of his current presidential term, Kalshi submitted a self-certification announcing its intention to offer and list sports event contracts on its exchanges involving the outcomes of games,” Wallach explained.
Wallach said the CFTC’s recent actions represent a significant departure from historic federal policy. He added that the agency has previously prohibited exchanges from listing or trading contracts involving or referencing gaming.
“This is, in many ways one of the most embraced, one of the most brazen self-enrichment schemes in U.S. presidential history,” Wallach told Spectrum News. “This is the same, tired narrative that Democrats have pushed against President Trump, his family, and his administration for a decade. President Trump only acts in the best interests of the American public — which is why they overwhelmingly re-elected him to this office, despite years of lies and false accusations against him and his businesses from the fake news media. There are no conflicts of interest.”