CFTC Files Lawsuits Against States Over Sports Event Contracts
The Commodity Futures Trading Commission (CFTC) has sued three states, Illinois, Arizona, and Connecticut, for attempting to ban prediction markets. This is the first instance in which the federal government has challenged the states' authority over sports-event contracts.
The suits are being brought against the officials of the states and their regulatory bodies, including their governors and gaming regulators.
The lawsuits argue that the CFTC holds exclusive jurisdiction over event contracts under the Commodity Exchange Act. According to the filings, this framework preempts state-level enforcement when contracts are listed and executed on federally regulated exchanges.
The agency maintains that sports-event contracts on prediction market apps fall within its remit and should not be treated as traditional sports betting under state law.
Each complaint challenges state-level enforcement actions. Illinois issued cease-and-desist orders on April 1, 2025, against platforms including Kalshi, Polymarket, and Crypto.com.
Connecticut had already taken similar steps in December, while Arizona escalated matters by filing criminal charges against Kalshi over alleged unlicensed betting activity.
The federal suits contend that these actions interfere with authority granted to the CFTC by Congress.
The regulator has requested court orders to block the states from enforcing laws that conflict with federal oversight. It also seeks costs and additional relief. Officials argue that state intervention complicates oversight of prediction markets and undermines uniform regulation across jurisdictions.
More than 20 related lawsuits are currently moving through US courts, reflecting a broader legal struggle between states, federal regulators, and market operators.
Washington lawsuit adds to growing legal conflict
Separate litigation in Washington has intensified scrutiny of prediction-market platforms. Washington Attorney General Nick Brown filed a case against Kalshi for operating an unregulated gambling platform where one can gamble on sports, politics, and other aspects of life.
According to the complaints filed, Kalshi is in violation of both the state’s Gambling Act and the Consumer Protection Act, and its operations can be construed as gambling according to the law. This is because users place bets based on odds and can win.
Washington law has prohibited internet gambling since 2006, and the lawsuit seeks to halt Kalshi’s operations within the state. There have also been attempts to impose monetary sanctions to recover any losses suffered by the population, as well as civil penalties.
“Kalshi wants people betting on almost everything possible in life,” Brown said. “For Kalshi, every event, every tragedy is nothing more than a potential way for Americans to risk their fortunes.”
This case has shown the marketing of Kalshi, in which the website claims that one can engage in gambling activities in a variety of instances, including betting on professional sports leagues like the NFL. This broad spectrum is said to increase the risk of gambling due to its natural online access.
According to the complaint, Kalshi was launched in 2025 and quickly became popular. It is argued by the authorities in Washington that this rapid growth poses significant consumer protection issues and may even lead to problem gambling.
