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, as well as various state officials, in response to their efforts to restrict prediction market providers. A number of states, including Illinois, have issued cease-and-desist letters to certain prediction market operators, asserting that these companies are offering sports betting products that should be subject to state regulation. However, the CFTC maintains that prediction markets are offering swap products, which fall under the purview of the federal Commodity Exchange Act, thereby granting the CFTC exclusive jurisdiction. The CFTC has reiterated this stance in the lawsuit, arguing that Illinois's actions are an overreach of the CFTC's authority and that federal law supersedes state regulations in this matter.
The lawsuit filing states, "Event contracts are a type of derivative instrument that enables parties to trade based on their predictions regarding the occurrence of future events, which may pertain to economics, elections, climate, sports, or any other topic with potential financial, economic, or commercial implications." In response, a spokesperson for Illinois Governor J.B. Pritzker issued a statement saying, "The Trump Administration is acting in the interests of companies that facilitate well-documented and lucrative insider trading schemes, generating substantial profits while exposing Illinois residents to gaming products lacking basic consumer protections and oversight.
This is a clear attempt to circumvent state 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, particularly under the leadership of Chairman Mike Selig, has consistently argued that prediction markets are subject to federal regulation, even as many of these companies expand their offerings to include bets on sporting events.
States, under both Republican and Democratic leadership, have pushed back against this stance. Last month, the Nevada Gaming Control Board obtained a temporary restraining order against Kalshi, with a hearing scheduled for this Friday.
According to Selig, "This is not the first instance of states attempting to impose conflicting and inconsistent obligations on market participants. However, Congress has explicitly rejected such a fragmented approach to state regulations due to its potential to result in inadequate consumer protection and increased risk of fraud and manipulation." The CFTC is scheduled 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 reading: Backlash against prediction markets may be a sign of an impending storm in 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 Selig. UPDATE (April 2, 2026, 22:33 UTC): This article has been updated to include a statement from Illinois.