The US Commodity Futures Trading Commission and the Justice Department filed a lawsuit Thursday against Illinois and various state officials over the state’s efforts to shut down market prediction providers.
Illinois sent cease-and-desist letters to some prediction market providers, arguing that the companies offered sports betting products that should be regulated under state law. The CFTC has argued that the prediction markets offer swaps products that are regulated under the federal Commodity Exchange Act and are therefore under that regulator’s “exclusive jurisdiction.”
In the lawsuit, the CFTC continued that argument, saying that Illinois’ efforts “intrude” on the CFTC’s role and that federal law preempts state regulations in this case.
“Event contracts are derivative instruments that allow parties to act on their predictions about whether a future event—which may relate to the economy, or elections, or climate, or sports, or anything else with a potential financial, economic, or commercial consequence—will occur,” the filing states.
The CFTC, particularly under current Chairman Mike Selig, has maintained that prediction markets are federally regulated, even as many of these companies expand to allow customers to place bets on sporting events. States, under both Republicans and Democrats, have pushed back. Nevada’s Gaming Control Board secured a temporary restraining order against Kalshi last month, with a hearing set for Friday.
The CFTC will participate in a Ninth Circuit Court of Appeals hearing later this month in a consolidated case involving the North American Derivatives Exchange, Kalshi and Robinhood.
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