The US Commodity Futures Trading Commission (CFTC) has escalated a jurisdictional clash with state governments by filing lawsuits against three states in a bid to assert exclusive federal authority over prediction markets.
The litigation targets Arizona, Connecticut, and Illinois — and in Illinois’ case, specifically names Governor J.B. Pritzker — after those states took steps the CFTC says improperly constrain or try to regulate contract markets that are registered with the agency.
CFTC Seeks Unified Regulation
In a statement announcing the legal action, the CFTC said event contracts traded on platforms such as Kalshi and Polymarket fall squarely within the Commission’s remit under the Commodity Exchange Act.
The agency argued that Congress intentionally established a unified national regulatory framework for commodity derivatives markets to prevent a fragmented patchwork of state rules that would, in the regulator’s view, undermine consumer protection and increase risks of fraud and manipulation.
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” CFTC Chairman Mike Selig said in the release.
The suits mark the first time the regulator has resorted to litigation to press this point, reflecting mounting tension between federal and state officials over how to treat prediction markets.
Congress Considers Tighter Prediction‐Market Curbs
The CFTC accused the named states of attempts to outlaw, limit, or otherwise interfere with the operations of designated contract markets (DCMs) that are registered with the Commission.
Those state actions, the agency said, run contrary to the Commodity Exchange Act’s delegations and risk imposing inconsistent obligations on market participants.
The regulator noted it recently issued an Advanced Notice of Proposed Rulemaking to clarify the application of the CEA and CFTC regulations to prediction markets, and signaled it expects to follow through with formal rulemaking that will more explicitly define and reinforce its supervisory role.
The legal push comes as Capitol Hill and other institutions weigh tighter curbs on certain types of event contracts. A group of congressional Democrats last week introduced legislation that would ban prediction-market wagers on sensitive topics, including elections, war, and sports.
Separately, Massachusetts Representative Seth Moulton proposed a restriction banning congressional staff from using prediction markets, a measure believed to be unprecedented in Congress.
Pressure has also come from professional sports organizations. Sabrina Perel, the National Football League’s (NFL) chief compliance officer, wrote to prediction market operators — in a letter reviewed by CNBC — asking them to block event contracts she considered objectionable.
The NFL has signaled that it believes sports-related contracts may warrant a distinct regulatory approach, an idea that mirrors the CFTC’s position that certain event contracts may need special attention.
Featured image from OpenArt, chart from TradingView.com
