The Commodity Futures Trading Commission and the US Department of Justice filed lawsuits Thursday against Illinois, Connecticut, and Arizona.
The suits challenge state regulators who sent cease and desist letters to prediction platforms like Kalshi and Polymarket in 2025, claiming the platforms' event contracts violated state gambling laws.
The federal lawsuit against Illinois argues the state Gaming Board overstepped by categorizing event contracts as 'wagers' instead of asset swaps. The CFTC asserts it has exclusive jurisdiction to regulate these markets under the Commodity Exchange Act.
CFTC Chairman Mike Selig said the states' attempts have led to market uncertainty and risk destabilizing effects.
The legal action comes as eleven states have taken action against prediction markets, and Congressional lawmakers are pushing bills to ban sports-related event contracts and prevent political insiders from betting on war.