This week in prediction markets saw notable developments, particularly regarding Kalshi's operations in Washington State. In correspondence sent to users, Kalshi informed them that trading on sports, elections, and political events is now prohibited in the state. This follows a court ruling that found the company likely in violation of the Washington Gambling Act and the Consumer Protection Act, effectively categorizing its activities as equivalent to illegal gambling.
The court's directive, part of a preliminary injunction issued in July, requires Kalshi to implement geofencing to restrict access in Washington by September 2, with potential daily penalties of $120,000 for noncompliance. The impacts of this ruling are already visible, as users in Washington are experiencing these new restrictions.
In a separate matter, Jeremy Levine, founder of Underdog, announced that he is facing a lawsuit from Aristotle International Inc. in conjunction with the sale of Underdog to IG Group for $1.3 billion. Levine took to X to share that this marks his first personal lawsuit, attributing the legal action to Aristotle's dissatisfaction with the financial outcomes from their licensing sales connected to the acquisition. Levine noted, "apparently the Aristotle folks are unhappy… they’re trying to extract more." This merger follows Underdog's acquisition of Aristotle Exchange earlier in 2026, facilitating its shift from daily fantasy sports to a focus on prediction markets. This shift valued Underdog at $1.2 billion during a funding round in March 2025.
Meanwhile, Polymarket US launched a new product allowing users to create payout combinations through parlay-style trades. With the onset of the football season, this introduction positions Polymarket competitively against Kalshi, which has already been offering similar options. Current trading data indicates that 80% of Kalshi's volume is concentrated on sports and combo contracts, a figure expected to grow as football gains popularity. Conversely, despite having just introduced parlays, over 98% of Polymarket's trading volume currently stems from sports.
Congressional action is also heating up regarding wildfire-related prediction markets. Representative Michael Baumgartner (R-WA) has introduced federal legislation aimed at prohibiting markets that speculate on wildfires or their consequences. This comes after reports indicated that individuals were utilizing these markets to bet on wildfire occurrences, prompting concern that such betting could motivate arson. Baumgartner asserted, "We don’t need betting markets giving potential big financial incentives to start fires… Congress should draw a clear line."
Criticism of prediction markets further emerged from Amanda Fischer, former chief of staff at the SEC. Now serving as COO and policy director at Better Markets, Fischer expressed her concerns over these platforms' attempts to offer sports-related contracts. Speaking on ‘The New Normal’ podcast, she indicated that companies are attempting to validate their business models while navigating changing political and legal landscapes. She remarked, "We have longstanding state and tribal gambling laws… Without sports, what are prediction markets, really? They’re niche, they’re not that interesting."
