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 various state officials, in response to their efforts to shut down operators of prediction markets. These states, among others, had sent cease-and-desist letters to certain prediction market providers, arguing that these companies were offering sports gambling products that should be subject to state regulation. However, the CFTC has consistently argued that prediction markets are essentially swaps products, which fall under the federal Commodity Exchange Act and thus come under its exclusive regulatory jurisdiction.
The lawsuit filed by the CFTC reiterates this stance, asserting that Illinois's actions 'intrude upon' the CFTC's regulatory role and that federal law supersedes state regulations in this matter. According to the lawsuit filing, 'Event contracts are derivative instruments that allow parties to trade based on their predictions about the occurrence of future events, which may pertain to economics, elections, climate, sports, or any other subject 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 involved in well-documented and lucrative insider trading schemes. These firms are generating record profits while exposing Illinois residents to gaming products that lack basic consumer protections and oversight.
This is a clear attempt to circumvent the state's authority and prioritize profits over consumer welfare. Illinois will not back down and will continue to fight for the protection of its consumers.' The CFTC, particularly under the leadership of Chairman Mike Selig, has maintained that prediction markets are subject to federal regulation, even as many of these companies have expanded their services to allow customers to place bets on sports events.
This stance has been met with resistance from states, regardless of their political affiliations. Nevada's Gaming Control Board recently obtained a temporary restraining order against Kalshi, with a hearing scheduled for Friday.
CFTC Chairman Mike 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 of state regulations because it leads to inadequate consumer protection and an increased 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 signal a potential storm for 2027.
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 further updated to include a statement from Illinois.