CFTC Sues Six States Over Prediction Market Jurisdiction

The Commodity Futures Trading Commission (CFTC) has filed lawsuits against six states—Arizona, Connecticut, Illinois, Minnesota, New York, and Wisconsin—to assert exclusive federal jurisdiction over prediction markets. The agency seeks to prevent these states from interfering with federal laws governing event contracts, arguing that these platforms function as regulated financial exchanges rather than gambling operations.

This legal escalation follows a move by Minnesota to become the first state to ban prediction markets entirely through legislation signed by Governor Tim Walz. Meanwhile, Rhode Island Attorney General Peter Neronha filed a separate lawsuit against platforms Kalshi and Polymarket, alleging they evade state gambling laws and deprive the state of revenue. In response, Kalshi filed its own federal lawsuit against Rhode Island to protect its ability to sell event-based contracts.

The conflict highlights a fundamental disagreement between federal regulators and state governments over whether prediction markets constitute financial instruments or illegal sports betting. Federal courts in Arizona and New Jersey have previously blocked state enforcement actions against Kalshi, supporting the federal agency's position that states cannot circumvent congressional directives regarding financial market regulation.