WASHINGTON — The Trump administration sued Arizona, Connecticut and Illinois on Thursday, seeking to block the states from regulating prediction market operators such as Kalshi and Polymarket on grounds that federal authority preempts state gambling laws.
The Commodity Futures Trading Commission filed the three lawsuits in federal courts, arguing that the states’ efforts to enforce gambling regulations against federally designated contract markets intrude on the CFTC’s exclusive jurisdiction over such financial instruments, according to court documents and administration statements.
The suits name the states’ governors and attorneys general as defendants: Arizona Gov. Katie Hobbs and Attorney General Kris Mayes; Connecticut Gov. Ned Lamont and Attorney General William Tong; and Illinois Gov. JB Pritzker and Attorney General Kwame Raoul.
State officials had issued cease-and-desist orders or taken other enforcement actions against prediction market platforms, contending that contracts tied to events such as sports outcomes or elections constitute illegal gambling under state law. Arizona’s attorney general brought criminal charges against Kalshi in March, court records show.
The CFTC complaints ask federal courts to declare that states lack authority to regulate or prohibit the offering of these contracts by platforms registered as designated contract markets with the federal agency.
Connecticut Attorney General William Tong accused the Trump administration of “recycling industry arguments” that have been rejected in district courts in other cases.
An Illinois spokesperson said the administration was “sidestepping Illinois’ jurisdiction” and “carrying water” for prediction markets.
The actions mark the most direct federal intervention to date in the dispute between the rapidly growing prediction market industry and state regulators. The platforms allow users to buy and sell contracts based on the predicted outcomes of real-world events, with payouts determined by whether the events occur.
Last month, the CFTC under Chairman Michael Selig filed friend-of-the-court briefs supporting Kalshi and Polymarket in related litigation, asserting federal preemption.
Prediction markets have drawn scrutiny over issues including potential insider trading and contracts linked to sensitive topics such as armed conflicts. Details of the specific contracts at issue in the new lawsuits were not immediately detailed in public filings beyond references to sports-event and other event-based contracts.
The cases were filed one day after reports of the planned actions and come amid broader tension between federal financial regulators and state gaming authorities over the classification of these platforms.
As of Friday, no hearing dates had been set in the three cases, and spokespeople for the CFTC and the states declined to provide additional immediate comment beyond statements already issued.
The lawsuits are pending in federal district courts in the respective states.
