CFTC Sues Arizona, Connecticut, and Illinois Over Prediction Markets

The Commodity Futures Trading Commission (CFTC) filed federal lawsuits on April 2, 2026, against Arizona, Connecticut, and Illinois to prevent these states from regulating or outlawing prediction market platforms. The federal government argues that platforms such as Kalshi, Polymarket, Crypto.com, and Robinhood facilitate event contracts—classified as financial derivatives or swaps—which fall under the exclusive jurisdiction of the Commodity Exchange Act of 1938 rather than state gambling laws.

State regulators had previously issued cease-and-desist orders, with Arizona taking the most aggressive action by filing criminal charges against Kalshi for violating gaming and election betting laws. In Illinois, the Illinois Gaming Board targeted several firms, leading to a lawsuit that names Governor JB Pritzker and Attorney General Kwame Raoul as defendants. Connecticut Attorney General William Tong rejected the federal position, arguing that these contracts are unlicensed illegal gambling.

CFTC Chairman Michael S. Selig stated the agency is defending market participants against overzealous state regulators to avoid a fragmented patchwork of regulations that could increase fraud risks. While the Trump administration supports these platforms, some members of Congress, including Senator Adam Schiff, have proposed legislation to ban sports wagers on federally regulated platforms to protect consumer interests and tribal sovereignty.