CFTC chairman says he will defend against any attempt to weaponize preempted state law against prediction markets
The Commodity Futures Trading Commission (CFTC) has stepped in to shield prediction market platforms from state efforts to rein in their sports-related event contracts.
The CFTC announced that it filed a motion on Wednesday in the U.S. District Court for the District of Arizona, requesting a preliminary injunction and temporary restraining order to prevent Arizona from applying state criminal and gambling laws against CFTC-regulated prediction markets.
The intervention by the CFTC is in response to a ruling Wednesday by the same court, allowing Arizona prosecutors to proceed with their criminal charges against prediction markets provider Kalshi.
Arizona Attorney General Kris Mayes filed criminal charges against Kalshi in March, accusing the company of operating an illegal gambling business by offering bets on professional and college sporting contests, including proposition bets on individual player performance.
The charges include four counts of election wagering in relation to the 2028 presidential race, the 2026 Arizona gubernatorial race, the 2026 Arizona Republican gubernatorial primary, and the 2026 Arizona Secretary of State race.
Betting on elections is banned under Arizona law.
CFTC chairman Michael S. Selig said: “Arizona’s decision to weaponize preempted state criminal law against companies that comply with a comprehensive federal regime sets a dangerous precedent.
“The CFTC is committed to vigorously defending its exclusive authority over prediction markets. We are asking the court to send a clear message that intimidation is not an acceptable tactic to circumvent federal law.”
The latest move by the CFTC comes a week after the Commission filed complaints against Arizona, Connecticut, and Illinois to uphold its “clear and longstanding exclusive jurisdiction to regulate event contracts under the Commodity Exchange Act”.
The CFTC and Kalshi found support for this argument on Monday when a federal appeals court approved Kalshi’s request for a preliminary injunction preventing the New Jersey Division of Gaming Enforcement (NJDGE) from enforcing state gambling laws against Kalshi’s sports contracts.
Kalshi’s motion was approved by the court after Kalshi demonstrated a reasonable chance of success on its argument that the Commodity Exchange Act (CEA) pre-empts applicable state law.
Two weeks ago, Washington State Attorney General Nick Brown filed a lawsuit against Kalshi for operating an illegal gambling business.
Brown is seeking a permanent injunction preventing Kalshi from offering illegal wagering in Washington State, as well as civil penalties and an order for restitution of players’ losses.