On July 10, 2026, a coalition of 40 U.S. state attorneys general and the District of Columbia escalated the fight over predictive markets by sending a letter to Commodity Futures Trading Commission (CFTC) Chairman Michael S. Selig. The letter, dated April 30, demands that sports-related prediction contracts remain under state gambling oversight rather than being classified as federal derivatives. This move challenges the CFTC’s recent push to assert jurisdiction over platforms like Kalshi, and highlights a fundamental clash between state gambling laws and federal financial regulation.
Core Argument: Sports Contracts Function as Bets
The attorneys general argue that the CFTC lacks exclusive authority over these contracts because they function identically to traditional sports betting. Users wager on game winners, point spreads, totals, and individual player statistics—exactly what sportsbooks offer. The letter states: “Traditional sports betting and the sports event contracts offered on designated contract markets (DCMs) present no significant differences.” They contend that renaming a bet does not change its substance. Moreover, such contracts do not qualify as “swaps” under the Commodity Exchange Act, as they do not hedge quantifiable economic exposure. Allowing the CFTC to regulate them would improperly shift a historically state-controlled activity to federal oversight.
Legal Front: Kalshi Wins Favorable Rulings
The letter comes amid a series of court victories for prediction market operator Kalshi. On February 19, 2026, a federal court in Tennessee granted Kalshi a preliminary injunction, ruling the platform would likely succeed in arguing its contracts are swaps preempted by federal law. On April 6, the Third Circuit upheld an injunction against New Jersey, reinforcing that federal preemption likely shields Kalshi from state gambling enforcement. In response, 38 attorneys general have joined Massachusetts’ lawsuit against Kalshi, seeking to reverse these rulings. Meanwhile, in April 2026, the CFTC joined federal prosecutors in the first-ever insider trading case involving a prediction market, charging an Army soldier with using non-public government information—signaling the agency’s determination to treat these markets as federal-regulated venues.
State Protections at Risk
The coalition warns that shifting oversight to the CFTC would undermine critical protections built into state gambling systems: licensing, age limits, self-exclusion programs, suspicious activity reporting, and safeguards for sports integrity. These measures address gambling-specific harms like addiction, financial ruin, and insider manipulation. The CFTC’s framework, designed for financial markets, lacks these tools. The letter asserts: “States have the expertise, experience, and tools to regulate sports betting, as they have done for over a century.” If the CFTC prevails, states fear an unregulated explosion of betting-like products without consumer safeguards.
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. The outcome of this standoff will determine the future of prediction markets in the United States.