The CFTC Has Now Sued Five States Over Prediction Markets; Monthly Volume Has Hit $20 Billion
In 2026 the Commodity Futures Trading Commission has filed federal preemption suits against Arizona, Illinois, Connecticut, New York and Minnesota in defense of its exclusive jurisdiction over CFTC-licensed event-contract exchanges. Monthly platform volume has grown from $1.2B in early 2025 to over $20B today.
The Commodity Futures Trading Commission has now sued five states in 2026 to block enforcement of state-level restrictions on prediction-market platforms: Arizona, Illinois, Connecticut, New York, and Minnesota. The Minnesota suit, filed May 20 in the District of Minnesota, is the most aggressive of the five because the underlying statute (SF 4760) makes platform operation a felony rather than imposing a civil penalty. The New York suit was filed days after the state alleged that Coinbase and Gemini were violating its gambling laws by listing event contracts. All five complaints ask the courts to declare that state gambling laws are "unconstitutional and invalid" if applied to derivatives listed on a CFTC-regulated Designated Contract Market.
The agency already has one preliminary-injunction win to point to. On May 5, 2026, US District Judge Michael Liburdi granted the CFTC a preliminary injunction barring Arizona AG Kris Mayes from prosecuting Kalshi under state gambling laws. Liburdi found three independent grounds for preemption: field preemption (the CFTC has exclusive jurisdiction over DCM derivatives under the Commodity Exchange Act), conflict preemption (state enforcement obstructs the regulatory regime Congress designed), and impossibility preemption (CFTC rules require open access while Arizona's statute criminalizes unlicensed wagering). The same reasoning is now driving the agency's four other state cases. At least fifteen state legislatures introduced prediction-market bills in 2026; how the courts rule on the first five suits will determine whether the rest of those bills move.
The states are not backing down. Minnesota State Representative Emma Greenman, who introduced SF 4760, told Salon the law "stops companies like Kalshi and Polymarket from offering bets in Minnesota on the outcome of events like sports, wars and political outcomes under the guise of 'prediction markets,'" and argued Minnesota "has had the authority to regulate gaming and gambling since we were a territory." AG Keith Ellison was sharper, calling prediction markets "designed to be addictive" and accusing them of "prey[ing] especially on young people and low-income folks. They help the ultra-rich get richer and the rest of us get poorer." Both lines preview the state's strongest argument: this is a gambling statute (where the state has traditional primary authority), not a securities statute (where the CFTC has primacy). The Wisconsin AG's separate lawsuit against the platforms themselves (filed April 2026) was followed by a CFTC counter-suit against Wisconsin on April 28, bringing the total number of states in active federal-preemption litigation to six when Wisconsin is counted.
Volume growth is the backdrop that explains why this fight matters now and not three years ago. In early 2025 combined monthly prediction-market trading averaged around $1.2 billion. As of this writing, monthly trades exceed $20 billion. That is a roughly 17x growth in eighteen months. With volume have come repeat insider-trading incidents: the April arrest of US Army Master Sergeant Gannon Ken Van Dyke for trading roughly $400,000 in profits on Polymarket Maduro-operation markets using classified intelligence; a recent New York Times investigation flagging more than 80 Polymarket wallets with timing patterns consistent with advance information on Iran-strike markets; and, this week, Kalshi suspending a MrBeast video editor who showed "near-perfect trading success" on markets tied to videos his employer was about to publish. The Donald Trump Jr. ties matter to the politics of the federal position but not to the underlying law: Trump Jr. is a strategic advisor to Kalshi and has invested in Polymarket through 1789 Capital, his venture firm. The Trump-led CFTC argues those connections are irrelevant to its jurisdictional claim, which rests on statutes Congress passed long before either company existed. Kalshi spokesperson Elizabeth Diana put the industry's case bluntly: "States can't ban federally regulated exchanges because doing so is a blatant violation of the constitution and federal law." Whether that holds up across all five active suits will be settled in federal court between now and the end of 2026.
Operators mentioned in this article
CFTC-regulated Kalshi
First fully CFTC-regulated US event-contract exchange.
Crypto / On-chain Polymarket
USDC-settled on Polygon. Largest prediction market by volume.
Broker (Embedded Contracts) Robinhood
Consumer brokerage offering embedded event contracts. Fastest-growing retail prediction market platform in the US.
Recent updates
Kalshi Launches Gold and Silver Perpetual Futures After CFTC Approval — First Non-Crypto Perps Cleared in the US
Kalshi launched perpetual futures on gold and silver on September 10 after the CFTC approved the contracts — making them the first non-cryptocurrency perpetual futures to receive US regulatory clearance. The contracts are cash-settled, never expire, and trade 24/7 using Pyth Network price feeds. Kalshi simultaneously has pending applications for perpetual futures on US equities, copper, and currencies. Since receiving CFTC approval for crypto perpetual futures in late May, Kalshi has done $44 billion in notional volume on those contracts. The gold and silver launches represent Kalshi's most direct competitive move yet against the CME and COMEX as established US commodity exchanges.
Robinhood Agrees to Exit Michigan Sports Contracts by October 9 — Court-Approved Deal Described as Blueprint
Robinhood Derivatives has agreed to stop offering new sports event contracts to Michigan customers by September 9 and close all outstanding positions by October 9, under a court-approved stipulation signed by US District Judge Paul Maloney on September 4. Michigan agreed not to enforce state gambling laws against Robinhood while the company complies. The deal preserves Robinhood's CEA preemption argument and keeps multiple Sixth Circuit appeals — involving Robinhood, Polymarket, Coinbase, and Kalshi — on track. Legal Sports Report called the agreement a potential 'blueprint' for how platforms and states might reach interim accommodations during the ongoing litigation.
Kalshi Seeks Ninth Circuit En Banc Rehearing While Robinhood Files Separate SCOTUS Petition
Kalshi filed a petition for en banc rehearing at the Ninth Circuit on September 9, asking the full 11-judge court to overturn the August 28 3-0 panel ruling that Nevada can regulate its sports contracts as gambling. Simultaneously, Robinhood filed its own separate certiorari petition with the Supreme Court challenging the same Ninth Circuit ruling. The two platforms are pursuing parallel legal strategies from the same defeat: Kalshi seeking a better ruling at the Ninth Circuit first; Robinhood going directly to SCOTUS. New Jersey has already filed a SCOTUS petition from the Third Circuit's April ruling. There are now two separate cert petitions before the Supreme Court on the prediction market question.