U.S. states are opening a new legal front against prediction market platforms by testing whether long-standing bans on election betting also cover event contract trading. The dispute gained urgency after Wisconsin's election commission warned last month that betting on elections, including through event contract exchanges, is illegal under state law and can cost violators their right to vote in the race they wagered on. Twenty-three states prohibit betting on elections, according to Pew Research Center, and New York also bars voters from casting a ballot in an election they have bet on. In many other states, penalties can include fines or jail time. Whether those statutes apply to prediction markets remains unsettled in much of the country, though Colorado said plainly that its law covers prediction markets, while New York, Arizona and Tennessee stopped short of giving definitive public interpretations. The clash sits inside a broader jurisdictional battle over prediction markets, which the CFTC (U.S. derivatives regulator) treats as swaps (derivatives whose value is tied to an underlying event) under federal oversight, while states argue many contracts amount to gambling. Legal experts told CNBC that elections may strengthen the states' hand because the U.S. Constitution gives states an explicit role in administering elections, potentially giving them a stronger preemption argument than in sports-related cases. That question is emerging even as sports contracts remain the core battleground. Nevada and Michigan have already used court action to curb platform operations, and New York's case against Kalshi centers on sports contracts while also citing the company's election offerings. Kalshi and Polymarket say federally regulated prediction markets fall under exclusive federal law, not a patchwork of state rules.