California Attorney General Rob Bonta and Minnesota Attorney General Keith Ellison have formally contested the CFTC’s claimed exclusive jurisdiction over prediction market platforms, arguing that event contracts on elections and sporting outcomes are gambling products subject to state authority rather than commodities derivatives regulated under the Commodity Exchange Act – a challenge that arrives as the Commission is simultaneously prosecuting preemption suits against at least six states and defending its regulatory perimeter at the federal appellate level.
The immediate procedural vehicle was a formal comment submission to the CFTC on April 30, signed by a bipartisan coalition of 41 state attorneys general, which argued that prediction market operators function as de facto sportsbooks and that the Commission lacks the statutory mandate, institutional infrastructure, and consumer-protection expertise to oversee them. Ellison followed that filing with public remarks on June 18, after the CFTC sued Minnesota on May 19 to block enforcement of SF 4760, the state’s newly enacted statute that classifies operating, facilitating, or advertising a prediction market as a felony – a scope broad enough, as legal commentators at Sheppard Mullin have noted, to turn legitimate DCM participants into criminal defendants overnight.
The coalition’s legal argument centres on a statutory interpretation contest over the CEA’s preemption provisions and their interaction with states’ traditional police powers over gambling. The attorneys general contend that the CFTC’s assertion of exclusive jurisdiction was never designed to reach wagering products marketed to retail participants on electoral and sporting outcomes, and that reading the CEA to displace decades of state gambling law requires a statutory inference Congress never made. Ellison stated: “States understand the social cost of gambling better than a commodities regulator ever could.” The broader coalition filing put the point more bluntly: “When someone bets on the outcome of an election or a sporting event through a prediction market, that’s gambling,” and framed the CFTC’s preemption theory as an attempt to conscript commodities law into a regulatory space it was never equipped to occupy.
California’s attorney general echoed those arguments specifically on the question of institutional competence, noting that the CFTC has no analogue to the addiction-mitigation, responsible gambling, and consumer-protection frameworks that state gaming regulators administer as core functions – a gap that the coalition argues cannot be papered over by federal preemption doctrine. CFTC Chair Michael Selig countered in a February 2026 amicus filing that permitting each state to apply its own gambling statutes to CFTC-registered DCMs would balkanize a national derivatives market and undermine Congress’s centralisation choice, framing Kalshi and its peers as operating within the same regulatory perimeter as traditional futures exchanges.
The California and Minnesota challenge fits a pattern of accelerating multistate legal pressure against prediction market operators and their federal regulator that has produced more than 20 lawsuits and cease-and-desist actions nationwide by mid-2026. The CFTC has responded with an aggressive preemption campaign of its own, suing Arizona, Connecticut, and Illinois on May 16 – three days before the Minnesota suit – and engaging in various enforcement postures against Wisconsin, New York, and Ohio. That campaign mirrors the Commission’s suit against New Mexico, filed jointly with the Department of Justice, which sought to enjoin the state from applying its 1953 gambling statute to sports-event contracts traded on CFTC-registered exchanges. A 38-state coalition has filed amicus briefs in ongoing appellate proceedings supporting state gambling authority, with oral arguments in Kalshi v. Ohio Casino Control Commission scheduled before the Sixth Circuit on July 30.
Kalshi and Polymarket, the two most prominent DCM operators caught in the crossfire, have built their U.S. operating models on the premise that CFTC registration provides a federal licence to operate across all fifty states – the same regulatory logic that Novig relied upon when it secured its own DCM designation earlier this year. A successful multistate campaign to establish that prediction markets fall under gambling law rather than commodities law would expose those platforms to dozens of incompatible state licensing regimes, many of which have no pathway for this product category, and would render the CFTC preemption argument that has shielded them from state enforcement effectively void.
The open question market watchers are now tracking is whether the Sixth Circuit’s ruling in the Ohio case – or a conflicting outcome in one of the circuits where the CFTC’s affirmative preemption suits are pending – produces a circuit split that forces Supreme Court resolution of the CEA’s reach over state gambling authority before any individual jurisdiction can settle the question on the merits.
Source: Crypto Briefing
Renata Kovacs has spent the better part of a decade following the regulatory shifts and licensing battles that define how gambling markets open, close, and evolve across Europe and beyond. She came up through the legal and compliance side of the industry before shifting her focus to journalism and analysis, giving her a perspective that sits closer to the operator room than the press box. Her coverage tends to cut through the noise and get straight to what a regulatory change actually means for the businesses and players involved.