CFTC and states clash over prediction market regulation

The Commodity Futures Trading Commission (CFTC) and several U.S. states are locked in a legal battle over the regulation of prediction markets, with 17 Democratic senators now urging Congress to block the CFTC from using federal funds to sue state authorities. The dispute centers on whether these markets fall under federal commodities law or state gambling oversight.

State-level actions

• Illinois passed a law (SB 3019) requiring prediction market platforms to be licensed to offer sports event contracts. Kalshi quickly sued, arguing the law violates federal authority and would cause irreparable harm. Source: Cointelegraph
• Kentucky, the first Republican-led state to face a CFTC lawsuit, sued Kalshi and Polymarket for operating illegal gambling platforms. The CFTC counter-sued to assert its exclusive jurisdiction. Source: CNBC

The CFTC, under Chair Michael Selig, has now sued nine states total, including Connecticut, Illinois, and New Mexico. Source: Cointelegraph

Federal pushback

• In a letter to the Senate Appropriations Subcommittee, Senator Richard Blumenthal and 16 other Democrats called the CFTC's actions an "assault" on state consumer protections and urged blocking funds for such lawsuits. Source: Cointelegraph
• Selig defended the agency's stance, stating the CFTC is "firmly committed to maintaining its exclusive jurisdiction over prediction markets." Source: CNBC
• Experts predict the legal battles could reach the , potentially revisiting the 2018 ruling on state sports betting authority.