The US Commodity Futures Trading Commission, in conjunction with the Department of Justice, has filed a lawsuit against Illinois, Arizona, Connecticut, and several state officials, challenging the states' attempts to regulate sports prediction markets. The lawsuit stems from the states' efforts to shut down certain prediction market providers, which they claim are offering sports gambling products that should be subject to state regulation.
However, the CFTC argues that these markets are, in fact, offering swaps products, which fall under the federal Commodity Exchange Act and are therefore under the CFTC's exclusive jurisdiction. The regulator claims that the states' actions are preempted by federal law and intrude upon the CFTC's authority.
The dispute centers on the definition of prediction markets, with the CFTC considering them derivative instruments that enable parties to trade on future events, including sports. Illinois Governor J.B.
Pritzker's office has responded, stating that the lawsuit is an attempt to prioritize corporate profits over consumer protection. The CFTC, under Chairman Mike Selig, has consistently argued that prediction markets are federally regulated, while states have pushed back against this assertion. The issue is set to be heard in an appeals court later this month, in a consolidated case involving several derivatives exchanges.