Why Kalshi and Polymarket Are Sitting Out the Kentucky Derby

Prediction markets like Kalshi and Polymarket have reshaped American sports betting in a remarkably short time. You can now trade event contracts on NFL games, NBA playoffs, March Madness, and even the weather — all through federally regulated platforms operating in all 50 states. Yet when the Kentucky Derby rolls around each spring, these platforms are conspicuously absent. For the 152nd running in May 2026, Kalshi offered no Derby markets at all, and Polymarket briefly posted contracts before being asked by Churchill Downs to remove them and refunding all trades. The reason comes down to one law that predates the internet by decades.

What Prediction Markets Actually Offer

Kalshi and Polymarket operate as federally regulated exchanges under the oversight of the Commodity Futures Trading Commission. Rather than placing traditional sports bets, users buy and sell event contracts — binary outcomes that pay out if a specified event occurs. Kalshi has offered contracts on NFL and NBA game outcomes, March Madness brackets, and a growing list of sports events. The platform reportedly took in more than $500 million in trading volume on the Super Bowl. Polymarket, which is working toward full U.S. market entry after operating offshore, has offered contracts on elections, geopolitical events, and various sports outcomes. Both platforms have signed licensing agreements with the NHL that permit trademark use — a model that has helped them integrate more deeply into professional sports.

What they have not done is offer markets on horse racing. The omission is not incidental. It reflects a deliberate legal calculation rooted in a regulatory framework that predates both platforms by nearly 50 years.

The Interstate Horseracing Act Creates a Different Legal Playing Field

The 1978 Interstate Horseracing Act is the core reason prediction markets cannot offer Kentucky Derby contracts without permission. The law was enacted to regulate interstate wagering on horse racing and, critically, to give track operators intellectual property rights over their racing content. Under the IHA, any entity that wants to accept wagers on a horse race across state lines must first obtain the consent of the host racing association — in the case of the Derby, that means Churchill Downs.

Churchill Downs CEO Bill Carstanjen has been direct about this. He described horse racing as operating under “a different legal paradigm than other sports offerings in the United States” and said the IHA “essentially gives us a series of rights — call them intellectual property rights — in our content.” In practical terms, this means no prediction market can legally offer Derby contracts without Churchill Downs’ approval, regardless of what the CFTC permits.

This is a materially different legal battleground than the one prediction markets have been fighting on with state gambling regulators. Kalshi and Polymarket have successfully argued in court that their event contracts are commodity derivatives governed by federal law, not gambling products governed by state gaming law, and that CFTC jurisdiction preempts state regulation. That argument has largely held up. But the IHA is also a federal statute — and the argument that one federal law supersedes another federal law specifically designed to govern a particular industry is far more complicated. Rather than test that argument in court over the Derby, prediction markets have stepped back.

What the Pari-Mutuel System Protects — and Why It Matters

The IHA was built around the pari-mutuel wagering model, which operates very differently from fixed-odds sports betting or prediction market contracts. In a pari-mutuel pool, all bets on a race go into a shared pool, the track takes a cut, and the rest is divided among winning tickets. Odds are not set in advance — they shift based on where the money goes and are not finalized until the gates open. The 2025 Kentucky Derby generated a record $234.4 million in wagers through this system, up from $210.7 million the prior year.

Prediction market contracts pulling volume from that pool do not just represent competition — they structurally harm the product. Larger pari-mutuel pools produce better payouts and attract more bettors. Any diversion of handle to an outside platform shrinks the pool, reduces payouts, and degrades the experience for bettors who remain in the authorized system. The National Thoroughbred Racing Association has made exactly this argument in a formal letter to the CFTC, warning that unauthorized horse racing event contracts would “divert wagering activity away from authorized systems” and cause “substantial economic harm to the horseracing industry.”

This financial reality explains why the IHA’s consent requirement is taken so seriously. Unlike professional sports leagues, which do not depend on gambling revenue the way horse racing does, the pari-mutuel ecosystem — tracks, horsemen, purses, state tax revenue — is directly funded by wagering handle. A platform taking bets on the Derby outside that ecosystem extracts revenue without contributing to it.

Where Bettors Can Actually Bet the Derby

If you want to bet the Kentucky Derby, the authorized options are well-established. TVG, TwinSpires, BetAmerica, and FanDuel Racing are among the licensed advance deposit wagering platforms that operate within the pari-mutuel framework and are available in most states. Retail wagering is available at Churchill Downs itself and at off-track betting facilities across the country. For bettors curious about regulated wagering options in the state where the race is held, the guide to Kentucky sportsbooks covers the legal landscape.

Is There a Path for Prediction Markets to Enter Horse Racing?

The IHA does provide a legal pathway: if a track operator grants consent, the barrier disappears. Some in the industry have argued that the smarter move would be to negotiate a licensing arrangement with prediction markets, capturing a share of the new wagering activity rather than simply blocking it. Jason Johnston, sportsbook manager at WarHorse Gaming in Nebraska, made this case at a National HBPA Conference panel in March 2026, arguing that the platforms will push aggressively regardless and the industry would be better served finding a way to participate in the revenue.

Churchill Downs, for now, appears focused on controlling its own wagering ecosystem rather than partnering with outside platforms. The company has signaled it will pursue legal action if any prediction market offers unauthorized Derby contracts. Given that Polymarket complied immediately when asked to remove its 2026 Derby markets rather than mount a legal challenge, the industry’s leverage appears real. For bettors hoping to trade Derby contracts on Kalshi or Polymarket, the answer for the foreseeable future remains no — and the law that says so has been on the books for nearly 50 years.