The Commodity Futures Trading Commission, in conjunction with the Department of Justice, has filed a lawsuit against Illinois, Arizona, and Connecticut, along with various state officials, in response to the states' attempts to shut down prediction market operators. 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 fell under state regulation. However, the CFTC maintains that prediction markets constitute swaps products, which are regulated under federal law, specifically the Commodity Exchange Act, thus falling under the CFTC's exclusive jurisdiction.
The lawsuit asserts that Illinois's actions encroach upon the CFTC's authority, with federal law taking precedence over state regulations in this matter. According to the filing, event contracts are a type of derivative instrument that enables parties to trade based on their predictions regarding the occurrence of future events, which could pertain to economics, elections, climate, sports, or any other event with potential financial, economic, or commercial implications. A spokesperson for Illinois Governor J.B. Pritzker released a statement, saying, "The Trump Administration is acting in the interests of companies that are driving well-documented and lucrative insider trading schemes, which are making record profits while exposing Illinois residents to gaming products lacking basic consumer protections or oversight.
This is a clear attempt to circumvent the state's jurisdiction and prioritize profits over consumer welfare. Illinois will not back down and will continue to fight for the protection of its consumers." The CFTC, under the leadership of Chairman Mike Selig, has consistently argued that prediction markets are subject to federal regulation, even as many of these companies have expanded to allow customers to place bets on sports events.
In response, states have pushed back, with both Republican and Democratic governments opposing the CFTC's stance. Nevada's Gaming Control Board recently secured a temporary restraining order against Kalshi, with a hearing scheduled for Friday.
Chairman Selig stated, "This is not the first instance of states attempting to impose inconsistent and conflicting obligations on market participants. However, Congress explicitly rejected such a fragmented approach to state regulations because it resulted in inadequate consumer protection and increased 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 more information, read: Backlash against prediction markets may be brewing. UPDATE (April 2, 2026, 17:42 UTC): This article has been updated to include information about 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.