CFTC Sues Nine States to Defend Prediction Markets
The CFTC has filed federal lawsuits against nine states trying to block CFTC-regulated prediction markets. What this means for traders, funds, and access.
Why Is the CFTC Suing States?
Prediction markets like Kalshi and Polymarket are federally regulated by the CFTC as Designated Contract Markets (DCMs). Despite this federal license, several states have argued that prediction market contracts constitute illegal gambling under state law — and have taken steps to restrict or block access for residents.
The CFTC's position: federal law preempts state gambling statutes when it comes to CFTC-regulated contracts. Starting April 2, 2026, the CFTC filed declaratory actions in federal district courts establishing that CFTC-licensed prediction markets cannot be blocked by state gambling enforcement. What began as three suits (Illinois, Arizona, Connecticut) has since grown to nine states: Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico, and Kentucky.
The CFTC's core legal theory received its first federal appeals-court validation on April 6, 2026, when the Third Circuit ruled 2-1 in KalshiEX LLC v. Flaherty that the CFTC has exclusive jurisdiction over trades on DCMs. New Jersey is now petitioning the Supreme Court (Justice Alito set an Aug 4, 2026 cert deadline). But state courts have since cut the other way \u2014 New York (Jul 7) and Washington (Jul 20) both rejected the preemption defense \u2014 producing a circuit split that may ultimately need Supreme Court resolution.
This follows Kalshi's 2024 federal court victory over the CFTC itself — a case that established prediction market election contracts as legally permissible. The new suits extend that logic to the states.
State status snapshot
| State | Complaint status | Note |
|---|---|---|
| Arizona Sued | CFTC declaratory action filed | CFTC TRO GRANTED April 10, 2026 — criminal arraignment paused; first-ever criminal PM charges (March 17) |
| Connecticut Sued | CFTC declaratory action filed | AG lawsuit filed — platforms operational |
| Illinois Sued | CFTC declaratory action filed | Not specified in public data |
| New York Sued | CFTC declaratory action filed | AG lawsuit filed — platforms operational |
| Wisconsin Sued | CFTC declaratory action filed | CFTC sued WI (April/July 2026) — CFTC seeking preemption declaratory judgment |
| Minnesota Sued | CFTC declaratory action filed | CFTC sued MN (April/July 2026) — CFTC seeking preemption declaratory judgment |
| Rhode Island Sued | CFTC declaratory action filed | CFTC sued RI (April/July 2026) — CFTC seeking preemption declaratory judgment |
| New Mexico Sued | CFTC declaratory action filed | CFTC sued NM (April/July 2026) — CFTC seeking preemption declaratory judgment |
| Kentucky Sued | CFTC declaratory action filed | HB 904 enacted 2026-04-14 via veto override — licensee choice forced |
| Nevada | No federal action | TRO GRANTED March 20, 2026 — Kalshi blocked in NV; PI hearing April 3 |
| Washington | No federal action | WA AG civil suit filed March 27, 2026 — seeks to shut down Kalshi operations in WA |
Account safety FAQ
Regulatory timeline
Washington grants preliminary injunction against Kalshi
King County Superior Court Judge John McHale granted Washington a preliminary injunction and expressly rejected the CEA-preemption defense, holding that federal commodities law does not displace state gambling law. The implementing order is expected by August 5. This directly contradicts the Third Circuit and deepens the circuit split.
New York federal judge denies Kalshi injunction
Judge Analisa Torres (SDNY) denied Kalshi's preliminary injunction in KalshiEX LLC v. Williams, ruling the CEA does not preempt New York gambling law. Kalshi appealed to the Second Circuit the same day. A major loss in a state the CFTC is also suing.
CFTC expands to nine states
The CFTC has sued nine states — Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, New Mexico, and Kentucky — seeking declaratory judgments that federal law preempts state gambling enforcement of CFTC-regulated event contracts.
Third Circuit validates CFTC preemption theory
The Third Circuit ruled 2-1 in KalshiEX LLC v. Flaherty that the CFTC has exclusive jurisdiction over trades on designated contract markets — the first federal appeals court ruling affirming prediction-market preemption over state gaming enforcement. New Jersey is now petitioning the Supreme Court (Justice Alito set an Aug 4, 2026 cert deadline).
CFTC files first suits (Illinois, Arizona, Connecticut)
CFTC and DOJ filed declaratory actions in federal district courts seeking to pre-empt state gambling laws — the opening round of what expanded to nine states.
Timeline will update as litigation progresses. Federal briefing schedules typically run 3–6 months before initial rulings.
Related reading
Kalshi State Restrictions Tracker
Active court orders, geofencing deadlines, and penalty amounts across all states — updated as enforcement develops.
CFTC ANPRM comment deadline for prediction markets
The regulator's open comment window and why it matters for event-contract policy.
CFTC Enforcement Overview
How the CFTC regulates prediction markets and what its enforcement authority covers.
Regulatory Tracker
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State Trading Status Map
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Congressional Bill Tracker
14 bills in Congress that could resolve the state vs. CFTC fight once and for all.
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State Checker
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Illinois Prediction Markets — July 1 Legal Status
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