CFTC Sues Illinois, Arizona, and Connecticut Over Prediction Market Jurisdiction

The Justice Department and CFTC filed lawsuits on April 2, 2026, against Illinois, Arizona, and Connecticut, asserting exclusive federal jurisdiction over prediction markets under the Commodity Exchange Act. The suits challenge state cease-and-desist orders sent to platforms like Polymarket, Kalshi, and Crypto.com, with Arizona having filed criminal charges against Kalshi for allegedly operating illegal gambling. The Trump administration argues the CFTC has sole authority to regulate sports-related wagers on prediction markets, while states contend these platforms constitute unregulated sports betting. The conflict involves political connections, as Donald Trump Jr. advises both Polymarket and Kalshi, and the federal attorney representing the government previously defended Kalshi against the CFTC in 2024.

Federal Lawsuits Against State Regulation of Prediction Markets

• ▪The Justice Department and the CFTC jointly filed lawsuits on Thursday, April 2, 2026, against Illinois, Arizona, and Connecticut
• ▪Illinois Governor J.B. Pritzker was named as a defendant in the lawsuit against the state of Illinois
• ▪The lawsuit against Illinois was filed in the U.S. District Court for the Northern District of Illinois

Jurisdictional Battle Over CFTC Authority vs. State Gambling Laws

• ▪The Trump administration argues the CFTC has exclusive jurisdiction to regulate sports-related wagers on prediction market platforms including Polymarket and Kalshi
• ▪A growing number of states have sued prediction market platforms in the last year, arguing sports-themed prediction markets are unregulated sports betting rather than event contracts under the CFTC's purview

Trump Administration's Political and Business Ties to Prediction Markets

• ▪Utah swung for Trump by more than 20 points in 2024
• ▪Yaakov Roth, the principal deputy assistant attorney general representing the federal government in its case against Illinois, previously represented Kalshi in the company's landmark victory against the CFTC in 2024
• ▪Donald Trump referred to Illinois Governor J.B. Pritzker as "a big fat slob" late last year
• ▪Donald Trump Jr. currently advises both Polymarket and Kalshi

Perspective of Trump administration and CFTC

• ▪Fragmented state regulation of prediction markets increases the risk of fraud and manipulation according to CFTC Chairman Michael Selig
• ▪Fragmented state regulation of prediction markets results in poorer consumer protection according to CFTC Chairman Michael Selig

Perspective of Prediction market operators (Polymarket, Kalshi)

• ▪Kalshi achieved a landmark legal victory against the CFTC in 2024 regarding prediction market regulation