CFTC and DOJ Sue Three States to Assert Federal Control Over Prediction Markets
Federal regulators drew a hard line on April 2, 2026, with the CFTC and Department of Justice filing coordinated lawsuits against Illinois, Connecticut, and Arizona over their attempts to shut down prediction market platforms. The complaints target state officials directly, naming Illinois Governor JB Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board as defendants. This is the first time the CFTC has sued a state government to defend its jurisdictional claim over event contracts.
The legal argument is straightforward: the Commodity Exchange Act grants the CFTC exclusive authority over derivative swaps, and event contracts qualify as exactly that. States calling these products “unlicensed sports wagering” are not just wrong on the law, they are interfering with federally registered designated contract markets. “Illinois’s attempt to shut down federally regulated DCMs intrudes on the exclusive federal scheme Congress designed to oversee national swaps markets,” the CFTC stated in its complaint. The lawsuits also invoke the Supremacy Clause, which means the federal government is not asking nicely here.
Eleven States In, Three Now Facing Federal Court
The three defendants are not outliers. A total of eleven states have taken enforcement actions against prediction market operators since 2025, issuing cease-and-desist orders to platforms including Kalshi, Polymarket, Robinhood, and Crypto.com. Nevada’s Gaming Control Board went further, securing a temporary restraining order against Kalshi, with a Ninth Circuit hearing scheduled. The CFTC will appear in that consolidated proceeding alongside cases involving the North American Derivatives Exchange and Robinhood, as Kalshi has been fighting state lawsuits while simultaneously posting record trading volumes.
Illinois is not backing down quietly. A spokesperson for Governor Pritzker accused the Trump administration of “carrying water for companies driving well-documented and lucrative insider trading schemes” and criticized platforms for generating “record profits” while offering products with no consumer protections. That is a political attack dressed up as a legal argument, and it will not survive a Supremacy Clause analysis. CFTC Chairman Mike Selig was blunter about the stakes: “These states’ aggressive and overzealous attempts to overstep the CFTC have led to market uncertainty and risks destabilizing effects for market participants and our registrants.”
Bitcoin BTC$77,253.00▲1.44%
Ethereum ETH$2,107.85▲1.87%
Tether USDT$0.9991▲0.03%
BNB BNB$661.36▲1.72%
XRP XRP$1.35▲1.36%
USDC USDC$0.9998▲0.01%
Solana SOL$85.32▲1.47%
TRON TRX$0.3714▲1.93%
Figure Heloc FIGR_HELOC$1.03▲0.00%
Dogecoin DOGE$0.1023▲1.42%Federal Preemption or Fragmented Chaos
Selig’s point about fragmentation is the one that matters most. Congress already rejected a state-by-state regulatory framework for these markets, precisely because inconsistent rules produce worse consumer outcomes and higher fraud risk. Eleven different enforcement regimes do not protect anyone; they just make compliant operation impossible and push activity toward less regulated venues. The CFTC’s broader push to consolidate federal authority over derivatives markets makes these lawsuits a logical escalation, not a surprise.
Coinbase has already filed its own preemption suit against Illinois officials in a parallel action. Congressional bills targeting sports event contracts and political insider trading add further pressure from another direction. The CFTC’s coordinated offensive with the DOJ signals that the federal government is done tolerating the ambiguity. The states picked this fight and now they will lose it in court, or Congress will render the question moot. Either way, the patchwork era for prediction market regulation is ending.
