The U.K.-based betting exchange Smarkets is pushing into the U.S. through parallel routes — seeking federal oversight from the Commodity Futures Trading Commission and applying to operate as a traditional sportsbook in multiple states. The dual approach highlights the unsettled legal environment around prediction markets and sports-event contracts, a debate that could reshape how fans wager on sports nationwide.
Company strategy reflects regulatory uncertainty
Founded in 2008, Smarkets has accumulated more than $60 billion in lifetime trading volume. The company filed for a CFTC license in March while also seeking sportsbook approvals in several states, including pending applications in Illinois, Iowa and Michigan, according to founder Jason Trost. Smarkets already operates as a sportsbook in Indiana.
Trost summed up the rationale for the two-pronged plan: the company wants to be ready regardless of whether the federal agency ultimately has preemption over state rules. He said the firm’s first preference is to operate as a federally regulated prediction exchange under the CFTC.
"The reason we're doing the dual track is because the legal situation is unclear if the CFTC has federal preemption or not," Trost said.
States push back while federal agency litigates
As Smarkets seeks to expand, a growing number of states have taken positions that some prediction-market offerings amount to unlawful gambling under state law. Those positions have prompted legal responses from the CFTC: the agency has taken steps to challenge state attempts to regulate or restrict federally licensed exchanges.
Last month, 44 state attorneys general filed a letter arguing that the CFTC cannot be the exclusive regulator for sports-related event contracts on exchanges. The dispute has turned contentious, with platforms and states exchanging sharp statements and litigation in several jurisdictions.
Smaller prediction platforms also have pushed back against state enforcement. In response to New York’s recent legal action, one exchange characterized the suit as political theater.
"States can't just shut down a federally licensed exchange. This would also just hurt New Yorkers, who would be driven offshore," Kalshi said.
Business implications for U.S. wagering and sports partners
Sports trading drives a significant portion of volume for exchanges such as Smarkets and its peers. The regulatory question at the heart of the dispute — federal preemption versus state control — affects not only operators but also leagues, teams and bettors. If the CFTC is deemed the primary regulator, markets designed as prediction exchanges could operate across state lines under federal standards. Conversely, state authority could constrain products and compel operators to pursue state-by-state approvals or alter offerings to comply with local rules.
- Federal filing: Smarkets filed for CFTC licensing in March.
- State applications: Pending sportsbook applications submitted for Illinois, Iowa and Michigan; operating in Indiana.
- Industry scale: More than $60 billion in lifetime trading volume.
| Jurisdiction | Status |
|---|---|
| Federal (CFTC) | License filed (March) |
| Illinois | Sportsbook application pending |
| Iowa | Sportsbook application pending |
| Michigan | Sportsbook application pending |
| Indiana | Operating as a sportsbook |
For the sports industry, the outcome will determine how novel betting products — including short-duration, event-based contracts tied to specific game outcomes — are distributed and regulated. It may also influence how major leagues and franchises engage with exchange operators on sponsorships, data rights and integrity protections.
As litigation and regulatory filings continue, Smarkets’ dual approach is a pragmatic acknowledgment of legal ambiguity. Whether federal licensing or state-level approvals become the dominant path will shape the future of sports betting innovation — and where American bettors can place certain kinds of wagers.
