US sues Arizona, Connecticut, Illinois to stop regulation of prediction markets
The Trump administration sued Arizona, Connecticut and Illinois on Thursday to stop what it called their unlawful efforts to regulate prediction markets because they may violate state gambling laws.
Attempts by states to shut down efforts by companies such as Kalshi, Polymarket, Crypto.com and Robinhood, to provide “event contracts” violated the Commodity Futures Trading Commission’s exclusive authority to regulate national swaps markets, the government said.
Event contracts let people trade based on the predicted outcomes of various events, such as sports and elections.
The lawsuits are the first by the CFTC to block state gaming regulators from policing operators of prediction markets.
Related Knowledge Center: Prediction markets
Platforms are offering a way for users trade positions — place bets — on a wide range of possible events, and newsrooms are starting to incorporate the data.
As the business rapidly grows, critics and opponents are pushing back. Numerous states have argued that the markets are gambling, and sports gambling in particular is regulated by the state. The Commodity Futures Trading Commission, now led by a Trump appointee, disagrees — as did a federal district court judge in a suit involving New Jersey.
Critics see some of the markets as, particularly in the case of military actions, indefensible, and note as well that some large, well-timed bets — “event contracts” — suggest an abuse of insider knowledge of federal actions.