The US Commodity Futures Trading Commission, in conjunction with the Department of Justice, has filed a lawsuit against Illinois, Arizona, and Connecticut, as well as various state officials, in response to the states' attempts to shut down prediction market providers. The states in question, including Illinois, had issued cease-and-desist letters to certain prediction market providers, arguing that these companies were offering sports betting products that should be subject to state regulation.
However, the CFTC has consistently argued that prediction markets are offering swap products, which fall under the purview of the federal Commodity Exchange Act, and thus are exclusively regulated by the CFTC. The lawsuit filed by the CFTC reiterates this stance, asserting that the states' actions "intrude upon" the CFTC's regulatory role and that federal law supersedes state regulations in this matter. According to the filing, "event contracts are derivative instruments that allow parties to trade based on their predictions regarding the occurrence of future events, which may pertain to economics, elections, climate, sports, or any other matter with potential financial, economic, or commercial implications." A spokesperson for Illinois Governor J.B.
Pritzker released a statement, saying, "The current administration is prioritizing the interests of companies involved in lucrative insider trading schemes over consumer protection. These firms are generating substantial profits while exposing Illinois residents to gaming products lacking basic consumer safeguards and oversight. This is a transparent attempt to circumvent state jurisdiction and prioritize profits over consumers, which Illinois will not back down from." Under the leadership of Chairman Mike Selig, the CFTC has maintained that prediction markets are subject to federal regulation, even as many of these companies have expanded to include betting on sporting events.
This stance has been met with resistance from states, regardless of their political affiliations. Recently, the Nevada Gaming Control Board obtained a temporary restraining order against Kalshi, with a hearing scheduled for later this month. Chairman Selig stated, "This is not the first instance of states attempting to impose conflicting and contradictory obligations on market participants.
However, Congress has 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 scheduled 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 information: Backlash against prediction markets may signal an impending storm.
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 updated to include a statement from Illinois.