The US Commodity Futures Trading Commission, in conjunction with the Department of Justice, has filed a lawsuit against the states of Illinois, Arizona, and Connecticut, along with several state officials, regarding their attempts to shut down operators of prediction markets. The states in question, including Illinois, had previously issued cease-and-desist letters to certain prediction market providers, asserting that these companies were offering sports betting products that fell under state jurisdiction. However, the CFTC maintains that prediction markets are, in fact, offering swap products, which are subject to federal regulation under the Commodity Exchange Act, thereby granting the CFTC exclusive jurisdiction.
The lawsuit reiterates this argument, stating that Illinois's actions are an intrusion upon the CFTC's authority and that federal law supersedes state regulations in this matter. According to the filing, "event contracts are derivative instruments that enable parties to trade based on their predictions regarding the occurrence of future events, which may pertain to economics, elections, climate, sports, or any other subject of potential financial, economic, or commercial consequence." A spokesperson for Illinois Governor J.B. Pritzker responded, saying, "The Trump Administration is prioritizing the interests of companies that facilitate well-documented and lucrative insider trading schemes, exposing Illinois residents to gaming products that lack basic consumer protections and oversight. This is a clear attempt to circumvent state jurisdiction and prioritize profits over consumer welfare.
Illinois will continue to fight for the protection of its consumers." Under the leadership of Chairman Mike Selig, the CFTC has consistently argued that prediction markets fall under federal regulation, even as these companies expand their offerings to include sports betting. However, states, regardless of partisan affiliation, have pushed back against this stance.
Last month, the Nevada Gaming Control Board obtained a temporary restraining order against Kalshi, with a hearing scheduled for this Friday. Chairman Selig stated, "This is not the first instance of states attempting to impose conflicting obligations on market participants. Congress explicitly rejected such a fragmented approach to state regulations due to its potential to compromise consumer protection and increase the risk of fraud and manipulation." The CFTC is set to participate in an appeals court hearing before the Ninth Circuit later this month, in a consolidated case involving the North American Derivatives Exchange, Kalshi, and Robinhood. For further reading: Backlash Against Prediction Markets May Signal a Storm on the Horizon for 2027.
UPDATE (April 2, 2026, 17:42 UTC): This article has been updated to include information regarding Arizona and Connecticut, as well as a statement from Chairman Selig. UPDATE (April 2, 2026, 22:33 UTC): This article has been further updated to include a statement from Illinois.