CFTC sues states to block regulation of Kalshi and Polymarket prediction markets

The Commodity Futures Trading Commission sues Illinois, Connecticut, and Arizona on April 2, 2026, arguing that state gambling regulators have no authority to regulate federally licensed prediction market companies. All three states issued cease-and-desist orders against Kalshi and Polymarket. Arizona filed criminal charges against Kalshi for violating state election-betting laws. The CFTC invokes Commodity Exchange Act preemption (7 U.S.C. 2(a)(1)(A)), arguing its federal oversight of event contracts displaces state gambling law. The lawsuit is the first time the CFTC has directly sued states to assert exclusive jurisdiction over prediction markets. Members of Congress trading on prediction markets during the Iran war have drawn insider trading scrutiny from Senators Warren and Ocasio-Cortez.