The CFTC is taking three U.S. states to court to defend its turf over prediction markets, arguing that only federal law, not state gambling rules, should govern event contracts on platforms like Kalshi and Polymarket. The lawsuits target Arizona, Connecticut, and Illinois and mark the agency’s most aggressive move yet in a growing jurisdiction fight.
What the CFTC is Asking the Courts to Do
The Commodity Futures Trading Commission filed individual civil actions in Arizona, Connecticut, and Illinois federal district courts on April 2. The complaints contest the actions taken by those states against designated contract markets (DCMs), often known as prediction markets, that are subject to CFTC regulation and list event contracts.
The CFTC says Congress gave it “clear and longstanding exclusive jurisdiction” over event contracts under the Commodity Exchange Act. It argues that when states try to outlaw, regulate, or otherwise restrain CFTC‑registered DCMs, they violate federal law and create the very patchwork Congress wanted to avoid.
In the suits, the CFTC asks the courts for a clear declaration. It wants judges to rule that applying state gambling laws to these federally regulated markets is “unconstitutional and invalid.”
The agency also seeks injunctions against the three states. It wants to stop Arizona, Connecticut, and Illinois from enforcing cease‑and‑desist letters or criminal charges. It also aims to block new licensing demands against prediction‑market operators and their intermediaries.
How States Have Pushed Back on Prediction Markets
A number of jurisdictions have taken action against sites that allow people to trade on elections, sporting events, and other events within the past year. Arizona accused Kalshi management of operating unauthorized sports gambling and permitting wagers on Arizona elections in violation of state law, and the state filed criminal charges against the company.
Kalshi, Polymarket, and other companies received cease‑and‑desist letters from Connecticut and Illinois. The letters directed them to stop promoting or providing prediction contracts to local residents as unlicensed gaming.
A federal appeals court recently allowed Nevada’s lawsuit against Kalshi over sports markets to move forward. That decision helped pave the way for a larger dispute.
State officials say many event contracts look like straightforward betting, not risk‑management tools. They argue these products clearly fall under long‑standing state gambling regulations.
Connecticut Attorney General William Tong has pledged to uphold his state’s consumer protection laws. He describes the CFTC’s stance as an industry‑driven attempt to rebrand “plainly unlicensed illegal gambling.”
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