CFTC Ramps Up Defense Of Sports Contracts With New Lawsuits

A federal regulator has officially entered the legal battle over sports prediction markets.

The Commodity Futures Trading Commission has filed lawsuits against Arizona, Connecticut, and Illinois over their actions against operators offering sports contracts. The trio of states has filed cease-and-desist letters against industry leaders such as Kalshi and Polymarket, with Arizona also filing criminal charges.

The lawsuits ask the courts to declare the gambling laws in those three states invalid, based on the arguments used to ban sports contracts.

CFTC Lawsuits Use Familiar Arguments, Tone

The CFTC’s recent lawsuits end any facade that they are weighing into the prediction market debate as a neutral observer.

Each filing not only recycles the same legal arguments as prediction operators do but also uses the same tone in defending the industry. They rip into state lawmakers, arguing their greed or desire for power is driving the effort to crack down on predictions. The words echo the defiant tone of operators like Kalshi, showing how aligned the two sides are.

“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” said CFTC Chairman Michael Selig in a press release. “This is not the first time states have tried to impose inconsistent and contrary obligations on market participants, but Congress specifically rejected such a fragmented patchwork of state regulations because it resulted in poorer consumer protection and increased risk of fraud and manipulation.”

State Lawmakers Point Finger at White House

Lawmakers from Connecticut and Illinois didn’t take long to respond to the lawsuits. 

Instead of attacking the CFTC and Selig, several pointed the blame on the Trump administration. The President’s family has ties to Kalshi and Polymarket, and has been fighting through growing opposition to keep the industry legal. Now, lawmakers believe they are using the federal regulator to fight their battle.

"The Trump Administration is carrying water for companies driving well-documented and lucrative insider trading schemes," a spokesperson for Illinois Gov. JB Pritzker said in a statement to ESPN. "These firms are making record profits while exposing Illinoisans to gaming products with no basic consumer protections or oversight. This is a blatant attempt to sidestep the State's jurisdiction and put profits ahead of consumers. Illinois isn't backing down -- we will continue to fight to protect Illinois consumers."

Arizona’s Inclusion Could Bring Risk

Unlike voters in the other two markets, voters in the Copper State are fairly evenly split between the country’s two parties. That means lawmakers need to walk a fine line to remain in office, leading them to refuse to match the fiery rhetoric of their peers in Illinois and Connecticut. 

Arizona’s status as a swing state is also why some were surprised to see it included in the CFTC’s lawsuits. 

If the regulator wins, it would shut down the state’s mobile betting market, cutting off a crucial source of tax revenue. Arizona uses that money for state services and schools so that many residents would feel the impact. 

While state lawmakers will take some of that blame, voters may be more upset about their own government actively harming the state they call home.