The Justice Department and the Commodity Futures Trading Commission filed lawsuits on Thursday against Illinois, Arizona, and Connecticut, asserting that federal law grants the CFTC exclusive authority to regulate sports-related wagers on prediction market platforms. The legal action represents the Trump administration’s most direct intervention yet in an ongoing dispute between federal regulators and state authorities over the fast-growing sector. Platforms named in the broader dispute include Polymarket, Kalshi, and Crypto.com.
Over the past year, a growing number of states have pursued prediction market platforms, contending that sports-themed contracts are not event contracts within the CFTC’s jurisdiction but rather unregulated sports betting operating under a different label. State regulators in the three targeted states sent cease and desist letters to the platforms last year, which federal authorities now argue violated a federal statute granting the CFTC sole regulatory oversight. The complaint filed in the U.S. District Court for the Northern District of Illinois calls on the court to halt what it describes as ongoing efforts to undermine the uniform application of federal law.
CFTC Chairman Michael Selig stated that the commission would continue to defend its exclusive regulatory authority and protect market participants from what he characterized as overreach by state officials. He argued that a fragmented patchwork of state regulations had previously led to weaker consumer protections and a greater risk of fraud and manipulation, and that Congress had deliberately moved to prevent such an outcome. Selig announced the filings on social media, noting that the CFTC and Justice Department acted jointly in response to inconsistent obligations being imposed on federally registered platforms.
The lawsuits arrive as state regulators have recorded some early legal wins. Last month, Nevada became the first state to temporarily ban a prediction market platform when a court sided with regulators in a case against Kalshi ahead of trial. Arizona separately became the first state to pursue criminal charges against Kalshi, alleging the company operated an illegal gambling business without a license. Federal officials indicated that additional lawsuits could follow, given that several other states have also issued cease and desist orders to platforms offering sports-related contracts.
The political dimensions of the cases are notable. Illinois Governor J.B. Pritzker, a Democrat whom President Trump has publicly criticized in sharp terms, is named as a defendant in the Illinois suit. Connecticut is also a Democratic-leaning state, while Arizona, though it voted for Trump in 2024, currently has a Democratic governor and two Democratic senators. However, the dispute does not fall strictly along partisan lines, as several Republican-led states including Tennessee and Utah have also moved against prediction market platforms in recent months.
The Trump administration has taken a notably supportive stance toward the prediction market industry. Trump’s media company holds its own ambitions in the prediction market space, and his son, Donald Trump Jr., currently serves as an adviser to both Polymarket and Kalshi. Adding another layer of complexity, Yaakov Roth, the principal deputy assistant attorney general representing the federal government in the Illinois case, previously served as legal counsel for Kalshi during the company’s significant court victory against the CFTC in 2024.
Originally reported by Decrypt.
