CFTC files lawsuit against Illinois concerning state’s cease-and-desist orders targeting prediction markets.

The CFTC contended in a lawsuit that the Commodity Exchange Act granted it "exclusive jurisdiction" over all swaps, which encompass prediction markets.

CFTC Chairman Mike Selig (Nikhilesh De/CoinDesk)

What to know:

• The CFTC initiated a lawsuit against Illinois, following the state’s attempt to close down sports-related offerings from prediction market providers.
• This lawsuit represents the latest development in an ongoing dispute between the federal regulatory body and states regarding oversight of sports-related prediction markets.
• States maintain that prediction markets related to sports are merely a form of gambling, while the CFTC asserts that these offerings fall within federal jurisdiction.

The U.S. Commodity Futures Trading Commission and the Department of Justice launched a lawsuit against Illinois and several state officials on Thursday concerning the state’s attempts to close prediction market providers.

Illinois issued cease-and-desist orders to certain prediction market providers, claiming that these businesses were offering sports betting products that ought to be governed by state regulations. The CFTC contends that prediction markets offer swap products, which are subject to regulation under the federal Commodity Exchange Act and are thus under the "exclusive jurisdiction" of the CFTC.

In its lawsuit, the CFTC reiterated this stance, indicating that Illinois’s actions "intrude on" the CFTC’s authority, and that federal law supersedes state regulations in this regard.

"Event contracts are derivative instruments that allow parties to trade based on their predictions about whether a future event—potentially related to economics, elections, climate, sports, or any other matter with possible financial, economic, or commercial implications—will take place," the document stated.

The CFTC, particularly under the leadership of current Chairman Mike Selig, has maintained that prediction markets are federally regulated, even as numerous companies in this sector expand services to permit customers to wager on sporting events. States, regardless of their political affiliation, have contested this stance. The Nevada Gaming Control Board secured a temporary restraining order against Kalshi last month, with a hearing scheduled for Friday.

The CFTC is set to take part in an appeals court hearing before the Ninth Circuit later this month, involving a consolidated case that includes the North American Derivatives Exchange, Kalshi, and Robinhood.

Read more: Prediction markets backlash builds possible stormcloud for 2027