Prediction markets set an all-time monthly trading record in July — and then immediately demonstrated why the record might not matter. Kalshi, Polymarket, and Polymarket US combined for $50.59 billion in volume last month, a 7.8% increase over June’s $46.95 billion, according to data published Monday by The Block. The milestone, driven almost entirely by the 2026 FIFA World Cup, arrived the same week New York’s attorney general filed a $36 billion civil enforcement suit against Kalshi and one day before New Jersey faces a deadline to petition the U.S. Supreme Court — the shot that could finally bring the entire regulatory dispute before the nation’s highest court.
For readers who trade on Kalshi, Polymarket, or Robinhood’s Rothera exchange, the record contains a message the headline figure obscures: open interest across all three platforms — the measure of unsettled positions that indicates how much money stays engaged between events — fell from roughly $2 billion at the start of July to approximately $1.2 billion by the end of the month, according to The Block’s daily open interest tracker. That 40% intramonth drop happened because the World Cup ended, positions resolved, and traders left the system rather than reinvesting. The platforms are not yet generating the sustained baseline trading activity that would make them structurally resilient. They are generating enormous peaks — and then waiting for the next one.
The next one is scheduled for November 3.
Kalshi Extends Lead; Polymarket US Shifts Direction
Kalshi claimed approximately 74.5% of the combined July volume, posting $37.7 billion — up 14% from June and the platform’s highest monthly figure on record. Its market for the Spain-Argentina World Cup final alone attracted roughly $1.9 billion in trading. Kalshi reported that the tournament accounted for the majority of its top-200 all-time markets by volume, and the platform processed well over $1 billion in daily volume on most days during the knockout stage.
The more strategically significant number sits inside the Polymarket family. Polymarket’s international exchange — the blockchain-based, crypto-denominated platform serving users outside the United States — shed 26%, falling to $7.9 billion as the World Cup wrapped up and as some U.S.-based traffic appeared to migrate toward domestic alternatives. Meanwhile, Polymarket US, the CFTC-regulated domestic exchange that removed its waitlist in May 2026, surged 54% to $5 billion. The divergence is consistent with what Rutgers University statistician Harry Crane estimated earlier this year: approximately 30% of Polymarket’s offshore volume may originate from U.S. users — traders who, now that Polymarket US is fully open, have a regulated domestic option, according to Crane’s published methodology. Crane emphasized that blockchain transactions do not reveal traders’ geographic locations, making that figure an estimate rather than verified data.
Combined, the two Polymarket venues fell slightly from June — $12.9 billion against June’s $14 billion — underscoring that Kalshi’s structural dominance is not incidental to any single event but is compounding month over month.
After the Confetti: Open Interest and the Event-Dependence Problem
The $50.6 billion figure is accurate. It is also, in an important sense, the wrong number to watch.
Trading volume measures how many contracts changed hands during the month. Open interest measures how many contracts are still outstanding — how much real capital is sitting in the market right now, waiting on an outcome. Volume peaks during tournaments because millions of short-duration contracts are created and resolved within days. Open interest falls afterward because those contracts settle and are not replaced at the same rate. The gap between a volume peak and an open interest trough is the gap between “the platform was busy” and “the platform is sustaining a user base.”
On July 1, with the World Cup in full knockout-stage swing, open interest across Kalshi, Polymarket, and Polymarket US stood at roughly $2 billion. By July 31, two weeks after Spain lifted the trophy, it had fallen to approximately $1.2 billion, per The Block’s open interest data. That is a 40% decline within a single month in which the platforms simultaneously set a volume record. The pattern is not evidence of failure — markets are supposed to clear efficiently — but it is evidence that these platforms have not yet solved what is commonly called the “event flywheel” problem: how do you maintain user engagement and capital deployment between the events that drive peak activity?
Kalshi’s answer, signaled by its July launch of a dedicated Midterms Hub, is political markets. Historically, political event contracts — who wins a Senate race, which party controls the House, what the Federal Reserve does with interest rates — generate more sustained activity than sports contracts because they run longer, they attract users interested in information rather than entertainment, and they don’t resolve in 90 minutes. The November 3 midterms, with 435 House seats, 35 Senate seats, and 36 governorships on the ballot, represent the industry’s next natural catalyst.
The structural challenge is that political markets currently carry a different legal risk than sports markets in some jurisdictions. And the legal risk on both fronts is escalating faster than at any point since prediction markets entered the mainstream.
A Constitutional Collision — and Why Murphy v. NCAA Matters Here
The legal dispute that has shadowed prediction markets through 2026 is often described as “CFTC versus the states.” That framing is accurate as far as it goes, but it understates the constitutional stakes.
In 2018, the U.S. Supreme Court issued its ruling in Murphy v. NCAA, striking down PASPA as unconstitutional. The Court held, bluntly, that Congress cannot command states to prohibit sports gambling. The ruling returned sports betting authority to the states — which is why state-licensed sportsbooks now operate across dozens of states and generate more than $10 billion in annual tax revenue.
The CFTC’s preemption argument in the current prediction market litigation is, structurally, the inverse of what PASPA attempted. Where PASPA tried to prevent states from allowing sports betting, the CFTC is now arguing that its designation of Kalshi and Polymarket US as Designated Contract Markets creates federal exclusive jurisdiction that prevents states from prohibiting or regulating that sports betting — by a different name — under their own laws. The constitutional question the Supreme Court is now being asked to consider is whether an executive agency’s regulatory licensing decision can accomplish what Congress itself was constitutionally prohibited from doing six years ago.
Gary Gensler, who ran both the CFTC and the SEC and helped draft the Dodd-Frank Act, has been unambiguous about his reading: “Congress didn’t explicitly say that the CEA somehow converted the CFTC into a national sports gambling regulator.” When you look at the purpose of the Commodity Exchange Act, Gensler has said publicly, it was not designed to address gambling addiction or displace state gambling authority, as he told CNBC in June 2026.
The New Jersey Solicitor General, Jeremy Feigenbaum, put the stakes in precise terms in his extension application to the Court: “The Third Circuit majority’s conclusion — that sports bets fall under the exclusive jurisdiction of the Commodity Exchange Act and that the Act preempts state regulation of these sports bets — would federalize a multibillion-dollar-a-year sports-wagering industry at the expense of every state law in the country,” as reported by Gaming America.
What Courts Have Said So Far
The only federal appellate court to rule on this question to date came down 2-1 for Kalshi. On April 6, 2026, the Third Circuit ruled in KalshiEX LLC v. Flaherty that sports event contracts listed on a CFTC-designated exchange are likely swaps preempted from state gambling regulation, per the full ruling on Justia. That ruling is New Jersey’s target: the state was on deadline August 4 to file its petition for Supreme Court review of the Third Circuit’s decision, in a case now docketed as Flaherty v. KalshiEX.
Every other court that has weighed in has disagreed. U.S. District Judge Analisa Torres of the Southern District of New York ruled on July 7 that the Commodity Exchange Act’s exclusive jurisdiction provision ruled against Kalshi on preemption on any of three available legal theories. A federal judge in Ohio reached the same state-protective conclusion. A federal judge in Washington State granted a preliminary injunction blocking Kalshi while litigation proceeds there.
The Sixth Circuit heard oral arguments on July 30 in consolidated appeals from Ohio and Tennessee — two lower courts in the same circuit that reached opposite conclusions on the same question. During the hearing, two judges challenged Kalshi’s lawyers directly, with one asking: “Why are you so disparaging of state regulators and state policymakers?” A separate Ninth Circuit panel, which heard consolidated arguments in April involving Kalshi, Robinhood, and Crypto.com, expressed similar skepticism and has also not yet ruled.
The count across state and federal courts, when trial and appellate decisions are combined, currently favors the state position by a wide margin. The only appellate decision goes the other way. That asymmetry, combined with the sheer volume of active cases — 20 or more proceedings across federal and state courts — is what makes a Supreme Court resolution both likely and soon.
New York Raises the Stakes
The most immediate legal pressure on readers who trade prediction markets is not the Supreme Court — it is New York.
On July 31, Attorney General Letitia James filed a $36 billion civil enforcement action against Kalshi in Manhattan state court, accusing the company of running an illegal gambling operation and exposing users between 18 and 20 years old to a product that state law restricts to those 21 and older. The damages figure is calculated under Executive Law §63(12), New York’s business fraud statute, which allows for disgorgement of profits, full restitution to customers, and treble penalties — mechanisms with no obvious geographic boundary, meaning the $36 billion figure could represent a claim against Kalshi’s nationwide revenue base rather than only its New York activity, according to Gaming America’s analysis.
The CFTC, reading the political and legal situation, moved before the attorney general filed. The agency submitted an emergency motion for a temporary restraining order in federal court on July 30, the day before James filed in state court, asking a federal judge to block New York from pursuing criminal or civil enforcement against any CFTC-registered entity, as documented in contemporaneous reporting. Kalshi pushed back publicly: “States can’t just shut down a federally licensed exchange.”
The federal judge the CFTC is asking to act sits in the same district — the Southern District of New York — where Judge Torres already ruled against Kalshi on July 7. Whether a different judge in the same courthouse will reach a different conclusion on the CFTC’s emergency motion is the most consequential near-term question for Kalshi’s access in the country’s largest financial market.
For traders in New York: platform access to sports-event contracts could be restricted without long advance warning if either the state court or a federal court grants a restraining order. Kalshi’s geofencing has been applied on short notice in other states — Nevada, Michigan, and Washington — where court orders have required it.
Where Does That Leave Traders?
The answer depends on where they live. More than a dozen states have either secured enforcement actions, obtained injunctions, or are actively pursuing litigation against Kalshi and Polymarket. The court-ordered access map changes faster than most platform notifications can keep up with.
The minimum-age issue is also unresolved for readers between 18 and 20. Kalshi accepts users at 18; every state-licensed sportsbook requires 21. The Pennsylvania Gaming Control Board filed a formal CFTC complaint in May that the agency had “actively endangered a highly vulnerable demographic of young adults” by permitting Kalshi to operate without raising the age floor. New York’s lawsuit sharpens that concern: any trader under 21 who has used Kalshi in New York may be characterized in the state’s civil action as part of the affected population the AG is seeking to recover for.
Kalshi’s own financial disclosures indicate that 2.9 accounts lose money for every account that shows a net profit. That ratio, combined with the absence of state-level problem gambling safeguards — the kind licensed sportsbooks are required to maintain — is the consumer-protection argument states are making in court and that, so far, courts outside the Third Circuit have found persuasive.
The platforms have added market integrity controls. Kalshi has referred cases to law enforcement and has opened internal investigations into potential violations in 2026. Polymarket hired Chainalysis to deploy on-chain market integrity tools after a Bloomberg Businessweek analysis identified trading patterns consistent with insider activity across tens of thousands of flagged transactions. Those controls matter — but they do not address the structural legal question that determines whether traders in most states can legally participate at all.
What Comes Next: The Midterms, the Court, and the Baseline Question
The midterm elections arrive November 3 — exactly three months from today. Political markets are already active on both Kalshi and Polymarket, with the balance of power in the House and Senate generating sustained daily volume. Kalshi CEO Tarek Mansour has publicly described the midterm cycle as the next major catalyst, and the platform launched its dedicated Midterms Hub in July to position itself as a political forecasting destination before NFL season begins.
Whether that catalyst will be available to readers in every state depends on what happens in the courts over the next several months. New Jersey’s Supreme Court petition, due August 4, does not guarantee the justices will agree to hear the case — petitions for review are denied more often than they are granted. But New Jersey’s lawyers have explicitly timed the petition to incorporate the Sixth Circuit’s eventual ruling, arguing that a Sixth Circuit decision against Kalshi would create exactly the kind of circuit conflict that typically triggers Supreme Court review. Gaming attorney Daniel Wallach has noted that the August 4 deadline is strategically important: it gives the state the opportunity to present the circuit conflict in its petition rather than filing prematurely, as he explained to Gaming America.
If the Supreme Court agrees to hear the case, the question of whether prediction markets are federally preempted gambling products or CFTC-regulated financial instruments gets a definitive constitutional answer — one that would affect not just Kalshi but every company that has since obtained or is seeking a Designated Contract Market license. That includes Robinhood’s Rothera, which posted $156 million in Q2 prediction market revenue and is itself a named party in the Ninth Circuit litigation.
The July volume record is real. So is the open interest collapse that followed it. Both are true simultaneously, and both are relevant to any reader deciding whether to deposit money on the next event contract. The $50.6 billion was a World Cup number. The midterms number — whatever it turns out to be — will be the first real test of whether prediction markets can sustain themselves between the peaks.
Frequently Asked Questions
Is it legal to trade on Kalshi or Polymarket in my state right now?
It depends on your state, and the answer may have changed recently. As of August 3, 2026, Kalshi has been blocked from offering sports-event contracts by court orders in Nevada, Washington State, and potentially New York pending the outcome of the attorney general’s lawsuit filed July 31. Michigan, Massachusetts, and Arizona have active enforcement actions. Minnesota’s felony ban was blocked by a federal judge on July 27 but could be reinstated if higher courts reverse that ruling. The safest course is to check Kalshi’s own state availability page before depositing funds and to monitor the platform for geofencing notices, which have been applied on short notice in other states. For a current state-by-state breakdown, CBS Sports maintains a tracker of Kalshi and Polymarket legal status across all 50 states.
What does “open interest” mean, and why does the 40% drop matter for traders?
Open interest is the total value of outstanding prediction market positions — contracts that have been opened but not yet settled. When the World Cup ended and all those contracts resolved, open interest dropped 40% — from roughly $2 billion to approximately $1.2 billion — because traders took their proceeds out of the system rather than immediately rolling them into new positions. That 40% drop in a single month, during the same month the platforms set a volume record, is the clearest available signal that prediction markets are still heavily dependent on marquee events to sustain peak activity. For a trader, it means the platform will likely be less liquid between now and whenever the midterm election cycle builds momentum — and less liquid markets mean wider spreads and larger price swings for smaller positions.
What would a Supreme Court ruling mean for prediction market traders?
A Supreme Court decision in Kalshi’s favor — holding that CFTC Designated Contract Market status creates exclusive federal jurisdiction that preempts state gambling laws — would effectively create national access to prediction market platforms regardless of state gambling statutes. Traders in every state could legally participate without the current ZIP-code patchwork of access and restriction. A ruling in the states’ favor would mean each state retains authority to enforce its own gambling laws against federally licensed prediction market exchanges, making the current enforcement landscape permanent and likely leading to platform shutdowns in states with active enforcement actions. The constitutional stakes are significant: the Murphy v. NCAA ruling in 2018 gave states the authority to legalize sports betting; the CFTC’s preemption claim would effectively remove that authority through a regulatory designation rather than an act of Congress.
Can I lose all the money I put into a prediction market contract?
Yes. A contract that resolves against your position settles at $0, meaning you lose the full amount you invested in that position. Kalshi’s own disclosures indicate that 2.9 accounts lose money for every one that shows a net profit. Unlike licensed sportsbooks, prediction market platforms are not required under current CFTC rules to maintain the same problem gambling safeguards — cooling-off periods, spending caps, responsible gambling referrals — that state-licensed betting operators must provide. Voluntary tools exist on both platforms, but their use is optional. Readers between 18 and 20 years old should also be aware that New York’s attorney general has specifically cited underage platform access as part of her $36 billion enforcement action, and this demographic gap is a live issue in multiple ongoing proceedings.
