Prediction markets have rapidly emerged as one of the most closely watched issues in state legislatures in 2026. These online platforms allow users to wager on the outcome of future events ranging from elections and sporting events to weather patterns and economic indicators. Operators argue that prediction markets function more like commodity exchanges than traditional sportsbooks because they facilitate trades between users instead of setting odds directly. That distinction has sparked a growing debate among policymakers over whether these platforms should be treated as financial products, gambling operations or a unique category altogether.
As prediction markets continue to gain popularity, lawmakers across the country are increasingly examining their legal status, consumer protections and taxation structures. So far in 2026, at least 17 states have considered legislation related to prediction markets, including California, Connecticut, Georgia, Hawaii, Illinois, Iowa, Kentucky, Maryland, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Vermont and Virginia.
Several states have already taken significant action on the issue. Key developments include:
- Minnesota Ban on Prediction Markets: Minnesota became the first state to enact a prohibition on prediction markets after Democratic Gov. Tim Walz signed SF 4760/Chapter 97, effective August 1, into law on May 18. The law originally included a ban on weather-based event contracts, though a late amendment removed those provisions. The Trump administration has since filed litigation challenging the state’s action.
- Hawaii Event Restrictions: Hawaii HB 2198 would prohibit prediction event contracts related to politics, sports, contests, catastrophes, death and individual persons. The bill passed the House in March and remains under Senate
- Kentucky Tax and Racing Measures: Kentucky enacted HB 757/Chapter 161, imposing a 14.25 percent excise tax on prediction market operator transaction fees after lawmakers overrode the governor’s veto on April 14. Additional legislation, HB 904/Chapter 184 and HB 869/Chapter 198, restricts horse racing tracks from partnering with entities offering sports event contracts through prediction markets.
- Tennessee Ethics Provisions: Tennessee SB 1992 criminalizes conduct intended to influence the outcome of an event when a person stands to benefit from the outcome of a prediction market contract. Republican Gov. Bill Lee signed the bill into law on May 22 and the law goes into effect on July 1.
Other states are exploring narrower regulatory approaches, including proposals to prohibit public officials from participating in prediction market transactions or to establish minimum age requirements for users. As legislatures continue evaluating the issue, debates are likely to center on whether prediction markets resemble gambling, financial trading or a hybrid regulatory category requiring new oversight frameworks.
The growing state activity signals that prediction markets are moving from a niche financial technology issue into a broader public policy debate involving gaming, consumer protection and financial regulation. FOCUS will continue to monitor prediction market legislation and regulatory developments across the country.
