State attorneys general challenge CFTC jurisdiction over sports prediction markets

A coalition of 44 state attorneys general has formally challenged the Commodity Futures Trading Commission’s authority to regulate sports-related prediction markets. The group submitted a letter on Monday, led by Ohio Attorney General Andy Wilson, arguing the agency’s proposed framework exceeds its legal mandate as the public comment period closed.

The coalition contends that the federal agency is overreaching into a domain historically managed at the state level. The letter states, "The CFTC in the Proposed Rule goes well beyond its statutory authority," and demands the agency draft new regulations consistent with the Commodity Exchange Act and the Constitution.

State regulators argue the federal proposal would "drastically expand federal regulatory authority in an area of major economic and political consequence that states have traditionally regulated." Emphasizing this historical divide, the letter notes, "States have long regulated gambling—including sports bets. The federal government has not."

Conversely, the CFTC maintains that these prediction markets constitute derivatives falling under its exclusive jurisdiction. The agency has consistently argued that individual states are unlawfully attempting to regulate federally overseen markets, setting the stage for protracted legal conflicts.

Beyond state regulators, the sports industry is also mobilizing against the expansion of these markets. According to a July 27 letter, the National Football League urged CFTC Chair Michael Selig to restrict sports prediction markets, warning that current proposals for event contracts fail to adequately protect game integrity and consumers.

The regulatory uncertainty is already producing fragmented operational realities for major platforms like Kalshi and Polymarket. On Monday, a federal judge blocked Minnesota from enforcing a new law banning prediction markets, allowing both companies to continue operating there pending litigation.

However, legal victories remain inconsistent across jurisdictions. A federal judge in New York simultaneously declined to prevent the state from enforcing its gambling laws against Kalshi.

Similar state-level crackdowns have gained traction elsewhere. A Michigan judge issued a temporary restraining order against Kalshi last month, and a Washington court recently granted a request to temporarily block the platform from offering sports-related event contracts, citing illegal gambling activities under state law.

For investors and market participants, this patchwork of judicial rulings and aggressive state-level coordination signals heightened compliance risks. The outcome of this jurisdictional battle will ultimately determine whether sports prediction markets can scale nationally under a unified federal framework or remain constrained by a complex web of state gambling laws.