In February, Commodity Futures Trading Commission chairman Michael Selig told those who might seek to challenge the regulator’s authority in prediction markets “we will see you in court.”
On Thursday, he made good on that threat.
The CFTC sued the states of Illinois, Arizona, and Connecticut for attempting to prohibit prediction-market platforms from offering sports-event contracts in their states. These represent the first lawsuits filed by the federal government against any states in the ongoing battle over sports event contracts. The Illinois suit also names individual members of its gaming board, Governor J.B. Pritzker, and other officials; the Arizona suit names Governor Katie Hobbs, the state’s gaming commission, and other officials; the Connecticut suit names Governor Ned Lamont, the Connecticut Department of Consumer Protection, and other officials.
The complaints are virtually identical. The CFTC says it is asserting its “exclusive jurisdiction” over event contracts, including those related to sports. It insists the Commodity Exchange Act—a federal law that gives the CFTC authority over prediction markets—represents a “comprehensive federal regulatory scheme,” which “preempts” state law “as applied to event contracts traded on federally regulated exchanges.”
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” Selig said in a statement announcing the trio of lawsuits.
The Illinois Gaming Board issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com on April 1, 2025, saying the sports-event contracts they offer through designated contract markets (DCMs) constitute unlawful wagering under state law. Connecticut issued cease-and-desists to Kalshi, Robinhood, and Crypto.com in December. Last month, Arizona became the first state to file criminal charges against a platform, Kalshi, for allegedly offering unlicensed sports and election betting in the state. That move came mere days after Kalshi preemptively sued Arizona over concerns it would take that exact step.
“Defendants misapprehend both the nature of these contracts and the federal regulatory framework,” the complaints say. “Event contracts, including sports-related event contracts that are listed on DCMs, are covered by the CEA, and the CEA prohibits States from invading the CFTC’s exclusive jurisdiction over event contract transactions offered by and executed on federally regulated DCMs.”
By seeking to ban companies that have not obtained sports betting licenses from offering sports event contracts, “defendants directly interfere” with the CFTC’s authority that was given to it by Congress “through the CEA,” the complaints say.
“This Court should put an end to the ongoing efforts by Defendants to undermine the uniform application of federal law,” they add.
According to the CFTC, attempts by states to rein in prediction-market platforms make it “much more difficult” for the agency to regulate the industry. The three-count lawsuits request a court order barring the states from seeking to enforce state laws that would “subvert” federal law, plus costs and fees, and any other relief as deemed just by the court.
Representatives for the defendants did not immediately respond to requests for comment.
The CFTC under Michael Selig—who was approved as chairman of the regulator in December—has made clear it believes sports event contracts fall under its jurisdiction and are not governed by state gambling laws. Platforms like Kalshi and Crypto.com have argued in court that there is a technical distinction between sports-event contracts and traditional sports betting, which is regulated on a state-by-state basis.
The Larger Landscape
There are more than 20 lawsuits winding through the U.S. court system over sports event contracts, some of which were filed by states against platforms while others were filed by platforms against states.
Experts expect the issue will ultimately reach the U.S. Supreme Court.
Meanwhile, platforms—now with the backing of the CFTC—are pushing to become “too mainstream to fail,” Melinda Roth, a professor of business, sports law, and corporate finance at Washington and Lee University, recently told Front Office Sports.
Kalshi and Polymarket have been striking commercial partnerships with news organizations and sports leagues, headlined by Polymarket’s recent multiyear, big-money agreement with MLB—a deal which included a memorandum of understanding between the CFTC and MLB. In addition to MLB, Polymarket has pacts with the NHL, MLS, UFC, and Spanish soccer league LaLiga. Kalshi is also a partner to the NHL, and has separate deals with Pro Padel League and six-on-six soccer association Baller League (Kalshi also has NBA investors in Giannis Antetokounmpo and Kyle Kuzma).
Lawmakers on both sides of the aisle, including Florida Gov. Ron DeSantis and Rep. Alexandria Ocasio-Cortez (D., N.Y.), have taken notice of the prediction-market industry. Mainstream politicians have made clear their distaste for both sports event contracts and markets tied to military actions and war, and there are more than eight pieces of legislation that have been proposed in recent weeks aimed at cracking down on prediction markets.
“The CFTC shouldn’t be regulating this,” Sen. Richard Blumenthal (D., Conn.), told FOS earlier this week. “What does the CFTC know about sports betting?”
