CFTC Sues Kentucky; Kalshi Sues Illinois Over Prediction Markets

The U.S. Commodity Futures Trading Commission filed suit against the Commonwealth of Kentucky in federal court, alleging state actions have blocked or interfered with prediction markets. Separately, event-contract platform Kalshi sued in Illinois, challenging state laws and enforcement that it says bar its products.

The CFTC’s complaint alleges Kentucky officials took steps to prohibit or disrupt markets that offer contracts tied to the outcomes of real-world events. The agency asks the court to declare those state actions unlawful and to enjoin their enforcement. The filing invokes the Commodity Exchange Act and argues the agency has exclusive authority to regulate markets that list contracts based on future events.

Kalshi’s complaint contends Illinois statutes and enforcement actions classify its event contracts as unlawful wagers and make offering those federally regulated products to Illinois residents illegal. The filing states Kalshi’s contracts are structured, listed and cleared within the federal framework overseen by the CFTC and asks the court to bar state enforcement and to declare the state laws preempted by federal law.

Kentucky and Illinois officials have relied on state criminal wagering statutes to restrict or order removal of certain prediction-market offerings. State authorities have cited consumer-protection and gambling laws when asserting the power to act against platforms they view as operating unlawfully.

Prediction markets let users buy and sell contracts that pay out based on event outcomes such as elections, economic data or weather. The CFTC in recent years has asserted jurisdiction over some event contracts when they are structured and traded like futures, and several firms have sought CFTC review or registration to operate under federal oversight.

The CFTC suit and Kalshi’s complaint were filed in federal court, where judges will consider statutory text, prior agency actions and the reach of federal preemption.