Federal Government Sues Three States Over Efforts to Regulate Prediction Markets Kalshi and Polymarket

(SeaPRwire) –   On Thursday, the federal government filed lawsuits against Connecticut, Arizona and Illinois, pushing back against the three states’ attempts to oversee prediction market operators including Kalshi and Polymarket.

All three states have issued cease-and-desist orders to these firms, alleging that they run unlawful online gambling operations in violation of respective state laws. Last month, Arizona also brought criminal charges against Kalshi for purportedly breaking state gambling statutes as well as a regulation that bans betting on elections.

In court filings, the Commodity Futures Trading Commission maintains that it, not state governments, has the authority to regulate these companies.

“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” CFTC Chairman Michael S. Selig said in a written statement. He noted that Congress “rejected such a fragmented patchwork of state regulations” because that system led to a heightened risk of fraud and inadequate consumer protection.

Last month, the Trump administration announced its support for operators Kalshi and Polymarket in a high-stakes legal dispute that could carry ramifications for the regulatory framework surrounding sports betting.

On Thursday, Connecticut Attorney General William Tong accused the Trump administration of “recycling industry arguments” that have been dismissed by district courts across the United States.

“These contracts are plainly unlicensed illegal gambling under time-worn state law, and we will aggressively defend Connecticut’s commonsense consumer protection laws,” he stated.