The U.S. Commodity Futures Trading Commission and the Department of Justice filed a lawsuit against Illinois and state officials on Thursday, accusing the state of trying to shut down prediction market providers.
The state of Illinois has sent cease-and-desist letters to some prediction market providers, saying the sports gambling products offered by the companies should be regulated under state law. The CFTC believes that prediction markets are offering swaps products that are regulated under the federal Commodity Exchange Act and therefore subject to the regulator’s “exclusive jurisdiction.”
In the lawsuit, the CFTC continued this argument, saying Illinois’ efforts “infringed” on the CFTC’s role and that federal law preempted state regulations in the matter.
“Event contracts are derivatives that enable parties to trade based on their predictions of whether a future event will occur, which may be related to the economy, elections, climate, sports or any other potential financial, economic or business consequences,” the document states.
The CFTC, especially under current Chairman Mike Selig, has argued that prediction markets are subject to federal regulation, although many such companies have expanded to allow customers to place bets on sporting events. States under both Republicans and Democrats have fought back. The Nevada Gaming Control Board obtained a temporary restraining order against Kalshey last month, and a hearing is scheduled for Friday.
The U.S. Commodity Futures Trading Commission (CFTC) will attend a hearing later this month at the Ninth Circuit Court of Appeals in a merger case involving North American Derivatives Exchange, Kalshi and Robinhood.
Read more: Prediction market backlash could form storm clouds in 2027
