Despite murky legal landscape, companies are undeterred in their prediction market investments

States and the federal government may be battling over who has the power to regulate prediction markets, but the companies building them are chugging along as the platforms continue to experience huge growth.

The Commodity Futures Trading Commission and six states across the country are in lawsuits over who has the jurisdiction to develop regulations on event contracts. Seventeen states in total are challenging companies with prediction markets — like Kalshi, Polymarket, Coinbase and Robinhood — and one has moved to ban them entirely. 

States are arguing that they have the ability to regulate these platforms due to their sports businesses, which they say are equivalent to gambling. Sports event contracts make up the majority of volume on prediction markets. However, the CFTC argues its right to regulate swaps and derivatives places all of these contracts under its jurisdiction. 

Congress is also stepping in with its own plans. House Oversight and Government Reform Committee Chairman James Comer told CNBC’s “Squawk Box” on Friday that he is seeking information from Kalshi and Polymarket’s CEOs on their internal efforts to regulate insider trading.

But legal uncertainty isn’t halting the confidence to invest in growing these platforms, based on comments from private companies’ leadership and private ones’ valuations. 

“There’s a lot of noise around the legal position-setting prediction markets,” said Flutter Entertainment CEO Jeremy Peter Jackson in its earnings call earlier this month. Flutter owns FanDuel Predicts. “Until we get through and understand ultimately what the Supreme Court says, I think we’re going to live with this uncertainty.”

Jackson said his company will continue to invest in market-making on third-party prediction market platforms, a new strategy it unveiled in its last earnings report, despite the legal questions.

DraftKings CEO Jason Robins said on a May earnings call that he sees the investment in the company’s prediction market platform as a long-term one. 

“Obviously, there’s always the chance that something regulatory wise or other changes, but assuming a consistent environment to what we see today, I expect that we’ll continue to invest in 2027.”

Legal questions aren’t slowing down private company growth either. Kalshi said its valuation is now $22 billion after a recently announced funding round, rising from $11 billion in December. Polymarket’s reportedly $15 billion valuation is up from $9 billion in October. 

Terrence Duffy, CME Group CEO — which helped develop FanDuel Predicts — said on an earnings call last month that while the legal fuss is over sports, other event contracts like on economics, politics and financial predictions are under less scrutiny. That’s why he thinks they’re growing. Bernstein estimates sports contracts will make up only about 30% of volumes by 2030. 

While he disagrees with the states, Robinhood CEO Vlad Tenev said he understands their frustrations. 

“I would love it if the states didn’t have concerns, but it’s also … not irrational, right?” he said on Robinhood’s April earnings call. “This is a jurisdictional dispute … and this is something that’ll play out in the coming years.”

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.