The U.S. Commodity Futures Trading Commission (CFTC) has sued three states in the latest tussle between the commission and state regulators over its jurisdiction over prediction markets. The move comes as more states move to crack down on prediction markets such as Polymarket and Kalshi, claiming they operate unlicensed sports betting platforms.
The CFTC is suing three states over prediction markets jurisdiction
In a press releaseThe CFTC revealed that it has filed lawsuits challenging the actions of the states of Arizona, Connecticut, and Illinois against prediction markets. The committee stated that various countries have attempted to ban, regulate or restrict the activities of these platforms despite the agency’s clear and long-standing exclusive jurisdiction over them.
The statement also said: “Congress decided long ago that a national framework for commodity derivatives markets was preferable to a fragmented patchwork of state regulations.” As CoinGape reported, Arizona criminally charged Kalci last month. Meanwhile, Connecticut and Illinois issued cease and desist letters to prediction markets.
Commenting on this latest action, CFTC Chairman Michael Selig said they will continue to protect their exclusive regulatory authority over these prediction markets and defend market participants against “overzealous government regulators.” He also noted that this is not the first time states have tried to impose inconsistent and conflicting obligations on market participants, but Congress has rejected such a move from state regulators.
Notably, the CFTC filed an amicus brief in February in Crypto.com v. State of Nevada to defend its jurisdiction over prediction markets. The clash between the commission and state regulators comes as prediction markets continue to face increased scrutiny, especially regarding sports betting and insider trading. As CoinGape reported, US Senators introduced a bipartisan bill Banning sports betting in prediction markets.
More lawsuits on the way
Legal expert Daniel Wallach said in Post X that there will likely be more federal lawsuits against other states that have sent cease-and-desist letters to these prediction markets. However, he added that by filing these lawsuits, the CFTC may have “unwisely” given states the right to sue for failure to enforce Rule 40.11(a)(1).
This provision prohibits contracts for events involving terrorism, war, assassinations, gaming, and other activities illegal under federal and state laws. Prediction markets have also been in the spotlight in this regardwith Top market prediction Polymarket currently offers contracts related to Iran war.
Meanwhile, Wallach also saw that the CFTC appeared to be targeting states that did not yet have jurisdictions and those that felt the oral arguments had gone too well for prediction markets, such as Illinois.
