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
An Independent Integrity Body Found 7 Betting Irregularities at the World Cup. FIFA Said There Were None. The Clash Centers on Polymarket.
The Group of Copenhagen — the Council of Europe's independent match manipulation watchdog — raised seven yellow notices for potential betting irregularities during the 2026 World Cup, in direct contradiction to FIFA's own Integrity Task Force, which published an all-clear on Tuesday. The most troubling finding involves Polymarket: the platform opened a market on July 2 asking whether Folarin Balogun would play against Belgium — the same day Balogun received a red card and three days before FIFA publicly confirmed his ban was suspended. No equivalent markets were opened for any of the other 14 red cards shown at the tournament.
After Yesterday's Hearing, Congress Looks Ready to Legislate on Prediction Markets — Not Just Watch
The House Agriculture Subcommittee held a two-hour hearing on July 22 examining sports event contracts, with witnesses from the American Gaming Association, tribal gaming, and both sides of the CFTC authority debate. Subcommittee Chair Dusty Johnson said Congress 'cannot afford to be silent' and signaled there is 'work for them to do.' Witnesses urged members to advance H.R. 7840, the Event Contract Enforcement Act, which would ban sports event contracts outright. The hearing adds a third front to a fight that is already being waged simultaneously in ten state courts and at the CFTC.
Bloomberg Found $200 Million in Suspicious Wagers on Kalshi and Polymarket. An Army Sergeant Has Already Been Indicted.
A Bloomberg investigation identified approximately $200 million in wagers on Kalshi and Polymarket between January and June 2026 displaying characteristics associated with potential insider trading — concentrated in geopolitical event markets. A federal indictment unsealed in April charged US Army Master Sergeant Gannon Ken Van Dyke with using classified information about Operation Absolute Resolve, the operation that captured Venezuelan President Nicolás Maduro, to generate $409,000 in profit. 57% of wallets with unusually successful returns were created within 24 hours of placing bets. The House Oversight Committee has launched a formal investigation.