On Thursday, the U.S. Commodity Futures Trading Commission (CFTC) alongside the Department of Justice filed a lawsuit against states including Illinois, Arizona, and Connecticut, along with various state officials, due to their attempts to close down prediction market providers.
These states issued cease-and-desist orders targeting certain prediction market providers, asserting that these companies were engaging in sports gambling activities requiring state regulation. The CFTC contends that these markets are dealing with swap products governed by the federal Commodity Exchange Act, placing them under the regulator’s exclusive jurisdiction.
The lawsuit reinforces this view, arguing that Illinois’s actions overstep into the domain of the CFTC and that federal law overrides state regulations in this area. “Event contracts are derivative instruments that allow trading based on predictions about whether a future event—be it economic, electoral, climatic, sporting, or otherwise of financial consequence—will occur,” states the filing.
Under Chairman Mike Selig’s leadership, the CFTC maintains that these prediction markets fall under federal regulation, even as they increasingly permit bets on sports events. Both Republican and Democratic state governments have resisted this stance. Recently, Nevada’s Gaming Control Board obtained a temporary restraining order against Kalshi, with a hearing scheduled for Friday.
“States have previously attempted to impose conflicting obligations on market participants; however, Congress specifically declined such fragmented state regulations due to their association with diminished consumer protection and heightened risks of fraud and manipulation,” Selig commented in a statement.
The CFTC plans to participate in an upcoming appeals court hearing before the Ninth Circuit this month, addressing consolidated cases involving North American Derivatives Exchange, Kalshi, and Robinhood.
For additional coverage: The backlash against prediction markets suggests possible challenges ahead for 2027.
UPDATE (April 2, 2026, 17:42 UTC): Information about Arizona and Connecticut added along with a statement from Selig.