The US Commodity Futures Trading Commission, in conjunction with the Department of Justice, has initiated legal action against the states of Illinois, Arizona, and Connecticut, along with various state officials, in response to their efforts to halt the operations of prediction market providers within their jurisdictions. This move comes after Illinois, among other states, issued cease-and-desist letters to certain prediction market providers, asserting that these companies were offering sports betting products that should be subject to state regulation. The CFTC, however, maintains that prediction markets are essentially swaps, which fall under the regulatory purview of the federal Commodity Exchange Act, thus granting the CFTC exclusive jurisdiction.
The lawsuit reiterates this stance, stating that Illinois's actions infringe upon the CFTC's regulatory role and that federal law supersedes state regulations in this matter. According to the filing, event contracts are considered derivative instruments that allow parties to speculate on the occurrence of future events, including those related to sports, which may have financial or commercial implications. In response, a spokesperson for Illinois Governor J.B. Pritzker stated, "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. 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 are subject to federal regulation, even as these companies expand their offerings to include sports betting. Conversely, states, regardless of their political affiliations, have challenged this stance.
Recently, the Nevada Gaming Control Board obtained a temporary restraining order against Kalshi, with a hearing scheduled for later this month. Chairman Selig remarked, "This is not the first instance of states attempting to impose conflicting 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 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 information: Backlash against prediction markets may signal a potential storm 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): An additional statement from Illinois has been included.