Senators Seek Spending Restrictions on CFTC Lawsuits Against States

Sens. Richard Blumenthal and Jeff Merkley are asking appropriators to stop the Commodity Futures Trading Commission (CFTC) from using federal money to challenge state and tribal oversight of online prediction markets. 

The two lawmakers led 15 colleagues in a letter to Senate appropriators responsible for the CFTC's budget. Their requested provision would be added to the fiscal 2027 Financial Services and General Government appropriations measure. It would prohibit the agency from spending appropriated funds on lawsuits intended to prevent states or tribes from enforcing gambling laws or tribal gaming compacts against prediction market apps.

The lawmakers framed the dispute as one over who regulates contracts tied to sports, political contests, and global affairs. They said such products have moved away from the original commercial use of event contracts, which they characterized as tools for managing risks in agriculture and other economic activity. 

Their letter also challenged the CFTC's assertion of exclusive authority over online prediction markets. It identified lawsuits brought by the agency against Connecticut, Illinois, Arizona, Wisconsin, New York, Minnesota, Rhode Island, and New Mexico. The lawmakers said the cases interfere with governments' efforts to apply their own gambling restrictions and consumer protections. 

The group argued that prediction market platforms have created concerns involving underage gambling, gambling harm, and financial losses. They said congressional appropriators can act because the Financial Services and General Government panel oversees CFTC funding. 

The request would not change existing law. It seeks to restrict agency spending in the next funding cycle. 

Michigan court denies Polymarket's request

That funding dispute has a parallel case in Michigan, where a federal judge recently rejected Polymarket's bid to stop state regulators from limiting its sports-related contracts. 

Judge Paul L. Maloney of the US District Court for the Western District of Michigan denied the company's request for a preliminary injunction. Michigan regulators maintain that the sports contracts amount to illegal sports betting under state law. Polymarket has argued that the products are swaps and belong within the CFTC's federal jurisdiction. 

Maloney concluded that Polymarket was unlikely to prevail on the merits at this stage. He also found that prediction markets tied to sports activity do not qualify as swaps, a finding that undercut the platform's CFTC-based argument. 

The decision adds to a developing split inside the Sixth Circuit. A federal judge in Ohio agreed with state regulators this past March. A Tennessee federal judge backed prediction markets in February. 

The case is headed to the Sixth Circuit Court of Appeals with deliberations set to start the following month. The appellate case will test conflicting rulings from lower courts within the same circuit. 

For now, Michigan's restrictions remain in place because the preliminary injunction was denied. The case does not settle the broader national dispute, but it provides state regulators with another court ruling supporting their position in sports-related prediction market cases.