CFTC Sues Six States Over Prediction Market Regulation

Sixteen states are involved in legal proceedings against prediction market platforms, while one state has moved to ban them entirely. The Commodity Futures Trading Commission has sued six states to defend what it describes as its exclusive jurisdiction over event contracts, which it classifies as swaps. The agency said it will target any state that undermines its authority.

Minnesota became the latest state sued by the commission after Gov. Tim Walz signed a law banning prediction markets as part of an online safety package. The law marks the first state-level ban on such platforms. CFTC Chair Michael Selig stated that states cannot circumvent the clear directive of Congress.

He said the commission's message to Wisconsin, New York, Arizona, and other states is that interference with federal regulation of financial markets will result in lawsuits.

Eleven states with ongoing legal proceedings against prediction markets have Democratic attorneys general, while five have Republican ones. The six states sued by the CFTC — Wisconsin, New York, Connecticut, Illinois, Arizona, and Minnesota — all have Democratic attorneys general.

Connecticut Attorney General William Tong said he cannot answer for the Trump Administration as to why the commission has chosen to sue only certain states with Democratic leadership. Arizona Attorney General Kris Mayes stated that red states and blue states alike believe the CFTC is improperly encroaching on the right of states to enforce their gambling laws.

A CFTC spokesperson said the commission's actions are based solely on its responsibility to ensure that states do not interfere with the trading of event contracts regulated under federal law. States argue that prediction market platforms are running illegal sports betting operations through their event contracts.