CFTC Sues Kentucky to Assert Exclusive Jurisdiction Over Prediction Markets

Prediction markets allow users to trade event contracts tied to outcomes such as elections and sporting events. The central dispute is whether these products are derivatives governed by the Commodity Exchange Act or wagers that states may regulate under gambling laws. The U.S. Commodity Futures Trading Commission argues that event contracts traded on designated contract markets fall under its exclusive federal jurisdiction. The ruling will affect whether platforms can operate across states under a single set of rules.

The Wisconsin Department of Justice sued five companies—Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase—on April 23, 2026, accusing them of illegally offering sports betting. On April 28, the CFTC, together with the U.S. Department of Justice, filed suit in federal court in Wisconsin's Eastern District. It was the agency's fifth similar lawsuit against a state government. The complaint seeks a declaration that state gambling laws do not apply and a permanent injunction barring state enforcement, but requests no damages.

Prediction markets use “event contracts” that allow users to trade on outcomes including sports and elections. The Commodity Futures Trading Commission argues that contracts traded on a CFTC-registered designated contract market fall under the exclusive federal jurisdiction of the Commodity Exchange Act. New York considers them gambling. The dispute will determine whether states may also use gaming laws to restrict nationwide platforms, with at least eight markets and more than 3,000 contracts at stake.

On April 21, 2026, the New York Attorney General’s Office sued Coinbase and Gemini, alleging that they operated without state licenses and allowed users aged 18 to 20 to participate, below the state’s minimum age of 21. No fixed damages were disclosed; the state also seeks disgorgement of illegal profits and treble penalties. On April 24, the CFTC sued in the U.S. District Court for the Southern District of New York, seeking a declaration of federal preemption and an order barring state enforcement. Together with its April 2 lawsuit against Arizona and two other states, the action expands the dispute to four states.

Prediction markets allow users to trade on the outcomes of political, sporting and other events, with trading volumes reaching billions of dollars. The U.S. Commodity Futures Trading Commission argues that event contracts traded on designated contract markets are “swaps” governed by the Commodity Exchange Act, preempting separate state regulation under gambling laws. The dispute will determine whether platforms such as Kalshi and Polymarket can operate nationwide.

Represented by the U.S. Department of Justice, the CFTC filed separate lawsuits against Illinois, Arizona and Connecticut on April 2, 2026. Since April 1, 2025, the Illinois Gaming Board had issued cease-and-desist orders to three CFTC-registered markets: KalshiEx, Crypto.com and Polymarket. The federal government is asking the courts to affirm the CFTC’s exclusive jurisdiction and permanently bar state enforcement, without seeking monetary damages.