The U.S. Commodity Futures Trading Commission and the Department of Justice have filed lawsuits against Illinois, Connecticut, and Arizona over the federal government’s authority to regulate prediction markets.
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- The CFTC and the Department of Justice have sued three states, arguing that prediction markets fall under exclusive federal derivatives oversight.
- Illinois and other states issued cease-and-desist orders, claiming the event contracts violate local gambling laws and licensing rules.
According to the complaint foot v. Illinois Governor J.B. Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board, the state gaming board improperly classified event contracts as “stakes” or “sports betting” rather than barter.
in Lawsuitsthe Commodity Futures Trading Commission (CFTC) asserts that it has “exclusive jurisdiction” to regulate “designated contract markets (DCMs),” which it says extends to forecasting platforms under the Commodity Exchange Act (CEA).
According to the regulator, Illinois’ move to shut down such platforms “intrudes on Congress’s exclusive federal scheme designed to oversee national swap markets, driven by the evolution of national financial markets and recurring conflicts with state law.”
“Unless restrained and ordered by the court, Defendants are likely to continue their attempts to subvert federal law and the exclusive jurisdiction to regulate event contract swaps that Congress grants to the CFTC,” the lawsuit added.
The issue stems from Cease and desist letters States and gaming regulators issued them last year against platforms including Kalshi and Polymarket. The letters claimed the contracts violated local gambling laws and licensing requirements.
Commenting on the developments, CFTC Chairman Mike Selig said described It called these actions “aggressive and overzealous attempts to bypass the CFTC,” in a separate statement after the lawsuits were filed.
“Our action today is intended to ensure our ability to effectively regulate the markets that Congress intends for us to oversee exclusively,” he added.
Over the past year, at least 11 US states, including Arizona, Nevada, Illinois, Maryland, New Jersey, Montana, Ohio, Connecticut, Tennessee, New York and Massachusetts, have Lawsuits have been filed against prediction market operators.
At the same time, some lawmakers are advancing legislative proposals that would ban contracts for sports-related events, while others seek to restrict participation in war-related prediction markets.
Despite legal pressures, prediction markets are growing rapidly. Ditto I mentioned By crypto.news Transaction activity has soared, with volumes increasing by more than 2,800% compared to the same period last year.
