Add Decrypt as your preferred source to see more of our stories on Google.
In brief The DOJ and CFTC sued Illinois, Arizona, and Connecticut to defend prediction markets from state regulation.
The Trump administration argues platforms like Kalshi and Polymarket fall under federal—not state—authority.
The move escalates a nationwide legal battle over whether prediction markets are gambling or federally regulated event contracts.
The Justice Department and the CFTC jointly filed lawsuits Thursday against Illinois, Arizona, and Connecticut, coming to the aid of prediction markets in the latest escalation of an ongoing jurisdictional battle over the novel sector.
In the lawsuits, the Trump administration argues the CFTC has exclusive jurisdiction to regulate sports-related wagers on popular prediction market platforms including Polymarket and Kalshi.
In the last year, a growing number of states have sued such platforms, arguing sports-themed prediction markets are not event contracts under the CFTC’s purview—but, instead, unregulated sports betting by another name.
The @CFTC has clear and longstanding exclusive jurisdiction to regulate prediction markets. But recently, state regulators have tried to impose inconsistent and contrary obligations on CFTC-registered prediction markets. In response, the CFTC and @TheJusticeDept today filed three… — Mike Selig (@ChairmanSelig) April 2, 2026
In suing Illinois, Arizona, and Connecticut—three of several states that have come after top prediction market platforms—the Trump administration has made perhaps its most forceful move yet to free the emerging sector from state gambling regulations.
“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 statement. “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.”
The DOJ and CFTC argued today that by sending cease and desist letters last year to Polymarket, Kalshi, and Crypto.com, state regulators violated a federal law granting the CFTC exclusive authority to regulate event contracts.
“This Court should put an end to the ongoing efforts by Defendants to undermine the uniform application of federal law,” Thursday’s complaint against Illinois, filed in the U.S. District Court for the Northern District of Illinois, reads.
In the last few weeks, state regulators have notched notable early victories against prediction markets. Last month, Nevada became the first state to successfully ban a prediction market platform temporarily, as its lawsuit against the platform, Kalshi, heads to trial.
Today’s lawsuits could soon be followed by more, given several other states have issued cease and desist orders to prediction market platforms offering sports-related wagers.
In going after Illinois and Connecticut first, the Trump administration has set its sights on two deep-blue states. Trump has, in particular, lambasted Illinois Governor J.B. Pritzker for resisting elements of the White House’s immigration crackdown, and referred to him late last year as “a big fat slob.” Pritzker was named as a defendant in today’s lawsuit against the state of Illinois.
While Arizona did vote for Trump in 2024, the “purple” state currently boasts two Democratic senators and a Democratic governor. Last month, the state became the first in the nation to file criminal charges against a prediction market platform, Kalshi, for allegedly operating an illegal gambling business without a license.
But tensions over prediction market regulation are not strictly partisan. Several red states have gone after Polymarket and Kalshi’s sports wagers in the last few months, including Tennessee. And the government of Utah, which swung for Trump by more than 20 points in 2024, has emerged as one of the leading critics of the ballooning sector.
The Trump administration, however, has taken an aggressively supportive approach towards prediction markets. The president’s media company has its own prediction market-related ambitions, and his son, Donald Trump Jr., currently advises both Polymarket and Kalshi.
Even the DOJ itself now shares some DNA with the lucrative sector. Yaakov Roth, the principal deputy assistant attorney general representing the federal government in its new case against Illinois, previously represented Kalshi in the company’s landmark victory against the CFTC in 2024.