Federal authorities filed legal action Thursday against three states that have moved to shut down prediction market platforms, sparking a jurisdictional battle over who controls these emerging financial instruments.
Connecticut, Arizona and Illinois have all issued orders demanding companies like Kalshi and Polymarket halt operations, claiming these platforms violate state gambling prohibitions. Arizona escalated the dispute last month by bringing criminal charges against Kalshi, alleging violations of both gambling statutes and laws prohibiting election wagering.
The Commodity Futures Trading Commission argues in its lawsuit that federal law gives it sole authority to oversee these market operators, not individual states.
CFTC Chairman Michael S. Selig defended the agency’s position in a statement, saying “The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators.” Selig added that Congress previously “rejected such a fragmented patchwork of state regulations” due to concerns about increased fraud risk and inadequate consumer safeguards.
The Trump administration recently backed the prediction market companies in this ongoing legal fight, which could influence future sports betting regulations.
Connecticut’s top prosecutor pushed back against the federal challenge Thursday, with Attorney General William Tong claiming the administration is “recycling industry arguments” that courts nationwide have already dismissed.
“These contracts are plainly unlicensed illegal gambling under time-worn state law, and we will aggressively defend Connecticut’s commonsense consumer protection laws,” Tong stated.
