US sues Arizona, Connecticut, and Illinois over attempts to regulate prediction markets

• Prediction markets are coming under fresh scrutiny in a new lawsuit launched by the CFTC against several states, their AGs, and governors
• The lawsuits are described as a scare tactic and "recycling failed industry arguments" that were shot down in district courts
• Regardless, the CFTC’s recent spate of lawsuits demonstrates its determination to press the issue

Recently increased scrutiny in the prediction markets sector, and state-level attempts to regulate the activity as a form of gaming, have finally involved an unsurprising party - the Trump administration - but in a rather unexpected way.

CFTC goes after states that try to regulate prediction markets

The government is now suing Arizona, Connecticut, and Illinois for what the regulator claims are illegal attempts to regulate prediction markets under state gambling laws.

In the lawsuits, the administration insists that these efforts are unlawful and seek to supersede the inherent power in the matter granted to the Commodity Futures Trading Commission (CFTC). This comes even as former Trump insiders have attacked the sector themselves.

Attempts to shut down or suspend the operations of Kalshi, Polymarket, Crypto.com, and Robinhood directly impinge on the CFTC’s exclusive oversight of the sector with respect to swaps markets.

The CFTC is determined to "safeguard its exclusive regulatory authority," the watchdog’s Chairman, Michael ​Selig, said in a statement. The CFTC has recently been working on a new set of rules to better direct state and federal lawmakers insofar as event contracts are concerned.

Selig said that the CFTC "will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators."

Democrats standing in the way of prediction markets now face increased scrutiny

The lawsuit goes a step further, targeting as defendants the state governors and attorneys general in each respective state, and specifically Katie Hobbs and Kris Mayes in Arizona, Ned Lamont and William ​Tong in Connecticut, and JB Pritzker and Kwame Raoul in Illinois.

While the fact that all of those people are affiliated with the Democratic Party one way or another could be purely coincidental, it does nothing to help improve the Trump administration’s revanchist streak, with the administration actively pursuing political opponents and critics.

Yet, Tong is unimpressed. He sees the lawsuits as a scare tactic and one that recycles failed industry arguments in district courts, giving them a fresh weight as federal jurisprudence.

The Trump administration is not indifferent to prediction markets, seeing how Donald Trump Jr. is an advisor for both Kalshi and Polymarket, two of the market leaders worth billions, and President Donald Trump himself announced the creation of his Truth Predict platform last year.

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