The US Commodity Futures Trading Commission, in conjunction with the Department of Justice, has initiated a lawsuit against the states of Illinois, Arizona, and Connecticut, along with several state officials, in response to their attempts to restrict prediction market operators. 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. However, the CFTC maintains that prediction markets are, in fact, offering swap products, which fall under the purview of the federal Commodity Exchange Act and are thus exclusively regulated by the CFTC.
The lawsuit reiterates the CFTC's stance, stating that Illinois's actions 'intrude 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 on their predictions regarding the occurrence of future events, which may pertain to economics, elections, climate, sports, or any other matter of potential financial, economic, or commercial consequence.' In response, a spokesperson for Illinois Governor J.B. Pritzker stated, '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 blatant 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 betting on sporting events. Meanwhile, states, regardless of their political affiliations, have pushed back against this stance.
The CFTC will participate in an upcoming appeals court hearing before the Ninth Circuit, which will address a consolidated case involving the North American Derivatives Exchange, Kalshi, and Robinhood. For further information, read: Growing 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): A statement from Illinois has been added.