The U.S. Department of Justice and the Commodity Futures Trading Commission have filed lawsuits against the states of Illinois, Arizona, and Connecticut to defend federally regulated prediction markets like Polymarket and Kalshi. The federal action, which argues these platforms fall under exclusive CFTC jurisdiction as event contracts, escalates a nationwide legal battle with states that contend the markets constitute unregulated sports gambling.
The Justice Department and the CFTC jointly filed lawsuits against Illinois, Arizona, and Connecticut, marking a significant escalation in a jurisdictional battle over prediction markets. The Trump administration argues the CFTC has exclusive jurisdiction to regulate sports-related wagers on platforms including Polymarket and Kalshi.
A growing number of states have sued these platforms, arguing they are not event contracts but unregulated sports betting. The federal lawsuits aim to free the emerging sector from state gambling regulations that officials claim create a problematic patchwork.
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” said CFTC Chairman Michael Selig in a statement. He argued Congress specifically rejected a fragmented state regulatory approach to ensure better consumer protection.
The DOJ and CFTC contend that state regulators violated federal law by sending cease and desist letters last year to Polymarket, Kalshi, and Crypto.com. “This Court should put an end to the ongoing efforts by Defendants to undermine the uniform application of federal law,” Thursday’s complaint against Illinois reads.
State regulators have recently notched early victories, including Nevada becoming the first state to temporarily ban a platform as its lawsuit against Kalshi heads to trial. Today’s federal lawsuits could soon be followed by more actions against other states that have issued similar orders.
While targeting Illinois and Connecticut, two Democratic-leaning states, the administration also sued Arizona, which filed the nation’s first criminal charges against Kalshi last month. However, tensions over prediction market regulation are not strictly partisan, as several Republican-led states have also taken action.
The Trump administration has taken an aggressively supportive approach towards prediction markets, with the president’s media company having its own related ambitions and his son, Donald Trump Jr., advising both Polymarket and Kalshi. Notably, the principal deputy assistant attorney general representing the federal government in the new case previously represented Kalshi in a landmark 2024 victory against the CFTC.
