A coalition of 40 state attorneys general, joined by the District of Columbia, sent a letter on April 30, 2026, to Commodity Futures Trading Commission (CFTC) Chairman Michael S. Selig, asserting that sports-related prediction markets should remain under state gambling oversight rather than being regulated as federal derivatives. The letter argues that these contracts function as wagers—not swaps or other financial instruments—and that the CFTC lacks exclusive authority over them.
Prediction Markets Are No Different From Sports Betting
The attorneys general highlighted that prediction market participants can wager on game winners, point spreads, totals, and individual player statistics, mirroring activities at traditional sportsbooks. “Traditional sports bets and sports-related event contracts offered on designated contract markets (DCMs) have no meaningful differences,” the letter states. They stressed that relabeling a bet does not change its fundamental nature: bettors risk money on uncertain sports outcomes for potential payouts.
Federal Court Rulings Intensify Jurisdictional Fight
The regulatory battle escalated in 2026. On February 19, a federal court in Tennessee granted Kalshi a preliminary injunction, ruling that the company was likely to succeed in its argument that its contracts qualify as swaps under the Commodity Exchange Act (CEA). On April 6, the Third Circuit affirmed an injunction against New Jersey, holding that federal preemption likely shields Kalshi from state gambling enforcement. Meanwhile, in a first-of-its-kind case, the CFTC joined federal prosecutors in April to charge a U.S. Army soldier with insider trading using nonpublic government information on prediction markets.
38 Attorneys General Back Massachusetts Lawsuit Against Kalshi
In a parallel development, 38 attorneys general have thrown their support behind Massachusetts’ lawsuit against Kalshi, challenging whether prediction markets violate state gambling laws. The case could set a precedent for how state gambling enforcement applies nationwide. The coalition warned that expanding federal derivatives law to cover sports betting would shift a traditional state-regulated activity into CFTC control, weakening protections built around gambling risks.
States Have the Expertise and Tools
The letter emphasizes that states have over a century of experience regulating sports betting, with established systems including licensing requirements, minimum age limits, voluntary exclusion programs, suspicious activity reporting, and measures to protect sports integrity. The CFTC’s regulatory framework, designed for financial markets, lacks the tools to address gambling-specific harms such as addiction, financial distress, and improper wagering by insiders or sports participants. “States have the expertise, experience, and tools to regulate sports betting as they have for more than a century,” the attorneys general wrote.
The letter was signed by attorneys general from Ohio, Nevada, New Jersey, New York, Tennessee, Utah, Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, Wisconsin, and the District of Columbia.