Trump Administration Sues Three States over Attempted Prediction Markets Regulation

The Trump administration has filed lawsuits against several states for trying to regulate the prediction markets sector. This action echoes CFTC chair Michael Selig’s previous claim that state regulators were overstepping.

The CFTC Says State Regulators Are Overstepping

Prediction markets continue to be the hottest topic among gaming industry stakeholders. This novel form of trading that allows participants to buy yes-no shares in the outcomes of various events has long irked gambling regulators, traditional operators, and tribal entities alike.

As entities under the purview of the Commodity Futures Trading Commission, prediction markets are regulated at the federal level, which supporters of the industry say takes precedence over state regulations. However, some state regulators firmly believe that prediction markets should follow state regulations and have attempted to rein in the industry.

According to the new lawsuits by the CFTC, these efforts violate the body’s exclusive authority to regulate national swaps markets. As a result, the lawsuits seek to “put an end to the ongoing efforts by defendants to undermine the uniform application of federal law.”

Michael Selig, chair of the CFTC, vowed to continue protecting market participants against “overzealous state regulators.”

Several States Have Tried to Get Prediction Markets Under Control

The lawsuits come as several states have tried to either directly regulate prediction markets or force non-compliant entities to cease and desist. Arizona, for example, just became the first state to file criminal charges against Kalshi. The state has been an avid opponent of the prediction markets sector, firmly believing it operates in violation of state rules.

Illinois, on the other hand, previously introduced a bill that would give the Illinois Gaming Board the authority to oversee and license prediction market operators. Iowa just advanced a bill that would regulate prediction markets as a separate vertical, although it hasn’t been named in the current lawsuits.

The lawsuits name Arizona, Illinois, and Connecticut’s Democratic governors and attorneys general as defendants. The three states’ respective gambling regulators have also been named as defendants.

The office of Illinois’ governor, JB Pritzker, responded to the lawsuits, accusing the Trump administration of trying to downplay Illinois’ own jurisdiction and prioritizing profits over the safety of the people of Illinois.

Connecticut’s AG, William ​Tong, echoed a similar statement, vowing to “aggressively defend Connecticut’s commonsense consumer protection laws.”