The U.S. Commodity Futures Trading Commission (CFTC), alongside the Department of Justice, has filed a lawsuit against the state of Illinois and its officials, including Governor JB Pritzker and Attorney General Kwame Raoul. The legal action, filed on Thursday in the U.S. District Court for the Northern District of Illinois, challenges the state's efforts to shut down prediction market platforms.
The conflict centers on Illinois sending cease-and-desist letters to providers like Kalshi, Crypto.com, and Polymarket, arguing these platforms offer sports gambling products that should be regulated under state law. The CFTC contends these platforms are offering swaps products, which are derivatives regulated under the federal Commodity Exchange Act, placing them under the CFTC's "exclusive jurisdiction." The agency's complaint states that Illinois's actions "intrude on" this federal role and that federal law preempts state regulations in this matter.
CFTC Chairman Michael Selig has been aggressively asserting the agency's authority, accusing states of a "power grab" and vowing the CFTC would "no longer sit idly by." This lawsuit marks the first time the CFTC has explicitly sued a state over jurisdiction for prediction markets. The agency is asking the court to find that Illinois violated the Constitution's Supremacy Clause and to issue a permanent injunction blocking the state from enforcing its laws against CFTC-regulated markets.
This legal battle is part of a broader clash between federal and state regulators. The CFTC is also participating in an appeals court hearing before the Ninth Circuit this month in a consolidated case involving the North American Derivatives Exchange, Kalshi, and Robinhood. Similarly, Nevada's Gaming Control Board recently secured a temporary restraining order against Kalshi.
