The U.S. Commodity Futures Trading Commission (CFTC) and the Department of Justice have initiated legal action against officials from Illinois, Arizona, and Connecticut regarding state-level attempts to regulate prediction market providers. The lawsuit, filed on April 2, 2026, contends that these state actions infringe upon the CFTC’s authority over swaps, which the agency argues includes prediction markets.
Illinois and several other states recently issued cease-and-desist orders to prediction market companies, claiming these entities were operating sports gambling platforms that should fall under state jurisdiction. In response, the CFTC maintains that prediction markets are classified as swaps under the Commodity Exchange Act, thereby placing them under federal regulation.
The CFTC’s filing emphasizes that state regulations conflict with federal law, asserting that Illinois’s actions encroach upon the CFTC’s exclusive jurisdiction. The agency describes event contracts as derivative instruments that allow participants to trade based on predictions of future occurrences with potential financial implications.
Under the leadership of Chairman Mike Selig, the CFTC has consistently advocated for federal oversight of prediction markets, even as these platforms increasingly enable betting on sports events. This stance has met resistance from various states, regardless of their political affiliations. Recently, the Nevada Gaming Control Board secured a temporary restraining order against Kalshi, a prediction market provider, with a court hearing scheduled for the following week.
Selig remarked that this situation is not unprecedented, citing previous instances where states attempted to impose conflicting regulations on market participants. He noted that Congress has historically rejected a fragmented regulatory approach, which can lead to diminished consumer protections and heightened risks of fraud.
The CFTC is set to 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.
The CFTC has filed a lawsuit against several states over their attempts to regulate prediction markets, asserting that such markets fall under federal jurisdiction. The agency's position emphasizes the need for consistent regulation to protect consumers and mitigate fraud risks.