CFTC Sues Three States and Wins Temporary Restraining Order to Assert Federal Jurisdiction Over Prediction Markets, USA, April 2026

The Commodity Futures Trading Commission filed suit on April 2, 2026, against Arizona, Connecticut, and Illinois in three separate federal district courts, seeking declaratory judgments and permanent injunctions to stop those states from enforcing state laws against CFTC-registered designated contract markets (DCMs) that operate prediction markets. On April 10, 2026, the U.S. District Court for the District of Arizona granted a temporary restraining order barring Arizona from continuing to pursue criminal charges against CFTC-regulated DCMs. The action is at the preliminary injunction stage; no final judgment has been entered.

The CFTC's authority derives from the Commodity Exchange Act (CEA), 7 U.S.C. § 1 et seq., as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Commission asserts "exclusive authority" over event contracts traded on DCMs under CEA Section 5c(c), which grants the CFTC plenary jurisdiction over commodity-based derivatives including event contracts. The CFTC contends that state criminal and civil enforcement actions against federally licensed DCMs are preempted by the Supremacy Clause of the U.S. Constitution and by the CEA's express preemption provisions.

DCM operators — including Kalshi and PredictIt — face immediate relief from state-level criminal charges in Arizona. Connecticut and Illinois face permanent injunction proceedings. Market participants who trade on CFTC-regulated prediction market platforms in those three states are directly affected: continued state enforcement would have required platforms to suspend access to users in those jurisdictions. The TRO preserves current market operations while the merits are litigated. Companies operating or considering entering the prediction markets sector in the United States should assess whether analogous state laws in other jurisdictions may trigger similar federal preemption arguments.

The scope of the TRO is limited to Arizona criminal proceedings. The civil injunction actions in Connecticut and Illinois remain pending. The CFTC separately published an Advanced Notice of Proposed Rulemaking on March 12, 2026 (CFTC Press Release No. 9194-26) seeking public comment on new regulations for prediction markets under the CEA. The comment period under that ANPR closes 45 days after Federal Register publication. The permanent injunction proceedings in all three states will proceed on separate schedules.

Prokopiev Law Group advises clients on prediction market regulation, CFTC compliance, event contract structuring, and cross-jurisdictional licensing disputes; our partnership network extends to specialized U.S. federal regulatory counsel and litigation teams able to assist DCM applicants, platform operators, and market participants facing enforcement exposure. Contact us to discuss your specific situation. Our practice covers event contracts, prediction markets compliance, CFTC designated contract market licensing, federal preemption analysis, state gambling law intersection, and regulatory litigation.

Source: CFTC Press Release No. 9206-26, "CFTC Sues Trio of States to Reaffirm its Exclusive Jurisdiction Over Prediction Markets," April 2, 2026, https://www.cftc.gov/PressRoom/PressReleases/9206-26; CFTC Press Release No. 9211-26, "Temporary Restraining Order Blocks Arizona Criminal Enforcement Proceedings on Prediction Markets," April 10, 2026, https://www.cftc.gov/PressRoom/PressReleases/9211-26. Confirmed April 14, 2026.

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